Seaport Global Securities Upgrades HB Fuller (FUL) to Buy
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Seaport Global Securities upgraded HB Fuller (NYSE: FUL) from Accumulate to Buy with a price target of $51.00 (from $50.00).
Analyst Michael Harrison commented, "We think the market overreacted to FUL's soft Q3 results, which were dragged lower by macro challenges and inflated plant costs. We are reducing our estimates to reflect further macro weakness, but increasing our price target from $50 to $51 on longer-term opportunities and upgrading our rating to Buy (from Accumulate). We believe FUL has turned a corner with margin performance and is in the early stages of leveraging its Engineering Adhesives business combining legacy FUL technologies with the acquired Tonsan and Cyberbond businesses. We expect FUL to capture share in fast-growing automotive, electronics, and solar markets, while benefiting from defensive growth in key hygiene and packaging markets. We believe plant start-up costs should dissipate over the next two quarters, contributing to YoY earnings growth. Americas grew volume 2% YoY excluding the negative mix impact of reformulations. Construction Products saw undue volume headwind related to prior-year load-ins and inventory management at key big-box retailers. On the macro front, we believe September is showing a normal seasonal pickup after a soft July and August. We note that FUL is currently trading toward the high end of the historical valuation range at 9.3x EBITDA, but we believe this is warranted given the longer-term opportunity set."
Shares of HB Fuller closed at $43.42 yesterday.
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