UBS Raises Price Target on Greenhill & Co. (GHL) to $17; Reiterates Sell
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UBS reiterated a Sell rating on Greenhill & Co. (NYSE: GHL), and raised the price target to $17.00 (from $13.00), following the company's 3Q earnings report. GHL reported EPS of $0.41, missing consensus estimates of $0.42. 4Q16 EPS estimates go up by 43c to $0.53 due to a much higher near-term outlook for advisory revenue that trickles into early 2017, which also drives our 2017 EPS estimates higher by 30c to $1.15.
Analyst Brennan Hawken commented, "GHL reported 3Q EPS of $0.41, beating our estimate of $0.40 but missing consensus of $0.42. Relative to our estimate, operating income missed as lower advisory revenues (8c headwind) were partially offset by lower comp (3c tailwind) and lower non-comp (4c tailwind). However, EPS beat our estimate due to a lower tax rate (3c tailwind) as GHL derived more revenue outside the US. Notably, cash dropped from $63.8 million at 6/30 to $55.8 million at the end of 3Q, but cash outside the US was largely unchanged ($45.1 million at 6/30). Interestingly, the cash dropped despite drawing down another $7.6 million on the revolver in order to prepay $5.6 million in term debt due in October. Consequently, these results do little to ease our longer-term concerns about GHL's balance sheet leverage, limited backlog, and upcoming bonus payments."
Shares of Greenhill closed at $23.55 yesterday.
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