UBS Downgrades CaesarStone Sdot-Yam (CSTE) to Neutral; Uncertainties Persist
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UBS downgraded CaesarStone Sdot-Yam (NASDAQ: CSTE) from Buy to Neutral with a price target of $30.00 (from $50.00) as uncertainties persist.
Analyst Susan Maklari commented, "Following 3Q results, we are taking a more guarded stance on Caesarstone. Our view reflects: 1) the extensive nature of the changes underway in its US operations from a sales and marketing perspective as well as the ramp up of its Richmond Hill facility and 2) the impact of greater competition from lower cost, overseas producers and what this will mean from a growth and profitability perspective over time. Although we believe the company will be successful in its efforts, this is likely to take time, delaying the impact to results relative to our initial expectations. We note that despite our more cautious near-term view and greater presence of imports, we remain committed to the longer-term value of Caesarstone's brand and believe its higher end offerings have a place in the market as quartz realizes greater acceptance among consumers."
Reflecting guidance 2016E EPS goes to $2.25 from $2.55 as 2016 revenues are now +6% from +11% (driven by the US at -2% from +6%) and EBIT margin goes to 18% from 20%.
Shares of CaesarStone Sdot-Yam closed at $27.80 yesterday.
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