MKM Partners Upgrades Gardner Denver Corp. (GDI) to Buy Ahead of Bid Results

February 11, 2013 10:36 AM EST
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Price: $75.99 --0%

Rating Summary:
    2 Buy, 7 Hold, 1 Sell

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    Up: 7 | Down: 3 | New: 2
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MKM Partners upgraded Gardner Denver Corp. (NYSE: GDI) from Neutral to Buy with a price target of $82 ahead of the company's mid-February update on private equity bidding results.

Analyst Josh Pokrzywinski comments, "We believe fundamental investors may have lost interest in GDI ahead of the binary update on the private equity bidding results in mid-February. That said, we believe an improving macro environment, a positive 4Q preannouncement and signs of stabilization in pressure pumping should point to upside in valuation. In light of improving fundamentals and the recent strength in the shares of GDI’s peers, the Board may look for more than the $75-$80 per share offer that has been widely reported in the media. In our view, GDI shares could see upside in the form of a higher PE bid or, should a deal fail to materialize, investors may have the opportunity to fill out positions on short-lived weakness in what is typically one of our more illiquid names.

The firm raised 2013 EPS estimates to $5.40 and 2014 to $6.10.

If the board rejects PE offers, the analyst believes management would expand the buyback program. "We believe the company’s leverage profile and strong free cash flow support 2014 earnings power above $6.40 with a buyback and leave excess FCF for strategic acquisitions," Pokrzywinski states.

For an analyst ratings summary and ratings history on Gardner Denver Corp. click here. For more ratings news on Gardner Denver Corp. click here.

Shares of Gardner Denver Corp. closed at $70.47 yesterday.

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