Davenport Upgrades TrueBlue (TBI) to Neutral

February 18, 2009 8:45 AM EST

Davenport upgrades TrueBlue, Inc. (NYSE: TBI) to Neutral.

Davenport analyst says, "We are upgrading shares of TBI to neutral as the stock has reached our previous price target of $8. While we continue to believe TBI is likely to face substantial headwinds in the near-term, we recommend investors move to the sidelines at current levels as the stock price movements have become somewhat disconnected from fundamentals. We will be looking for positive signs within temporary unemployment and/or general economic growth before becoming more constructive on shares of TBI...In our view, TBI will continue to face a number of near-term headwinds as United States economic conditions continue to deteriorate. First and foremost the company must navigate rising unemployment, which has been particularly acute within the blue-collar industrial sector (i.e. construction and manufacturing). Second, TBI will likely be forced to continue to shutter branches and cut personnel as management focuses on reducing costs to offset the natural deleveraging resulting from declining revenue. Finally, TBI should also face continued gross margin pressure as competitive pricing proliferates and the federal minimum wage increases to $7.25 per hour in July of this year. Despite these headwinds, we believe TBI has reached a level where much of the negative news is already reflected in the share price and the stock is no longer reacting to fundamental trends."

TrueBlue, Inc., formerly Labor Ready, Inc., (TrueBlue) is an international provider of temporary blue-collar staffing.

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