Wells Fargo Starts Lufkin Industries (LUFK) at Market Perform

December 10, 2012 7:42 AM EST
Get Alerts LUFK Hot Sheet
Price: $88.49 --0%

Rating Summary:
    1 Buy, 10 Hold, 2 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 19 | Down: 19 | New: 13
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Wells Fargo initiates coverage on Lufkin Industries (NASDAQ: LUFK) with a Market Perform ratinga nd $58-$65 valuation range.

The firm comments, "Our 2012E and 2013E revenue/EPS are $1.268B/$2.86 and $1.407B/$3.90. A near pure play on land oil production equipment, LUFK is presently in "show me" mode, as it works to restore optimal execution following a disruptive period of massive organic and acquisitive investment. Once it does, LUFK's Oilfield division should be a main beneficiary of the secular uptrend in onshore artificial lift demand, given it codominates the rod lift niche and is at the forefront of lift automation. Also, its Power Transmission division is levered to the steady, secular ramp in energy sector spending on turbomachinery. Consistent with our peer universe valuation framework, for LUFK, we use historical EV/EBITDA multiples as our primary methodology, assume 2013 is the upcycle midpoint year, and; thus, to arrive at our high-end target, apply 7.9x to 2013E EBITDA. We then increase this past mean multiple of 7.9x by 20% or 1.6 turns to 9.5x to reflect LUFK's takeout allure."

For an analyst ratings summary and ratings history on Lufkin Industries click here. For more ratings news on Lufkin Industries click here.

Shares of Lufkin Industries closed at $57.72 yesterday.

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