Davenport Upgrades Texas Industries (TXI) to Neutral; Further Estimates Cuts Still Likely

November 30, 2009 10:46 AM EST
Get Alerts TXI Hot Sheet
Price: $92.10 --0%

Rating Summary:
    0 Buy, 7 Hold, 0 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 30 | Down: 30 | New: 23
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Davenport upgrades Texas Industries (NYSE: TXI) from Sell to Neutral.

Davenport analyst says, "Following the recent decline in TXI’s stock price, we are raising our rating on the company’s shares. TXI’s price has declined 11.1% since our June 3 downgrade note, compared to an
increase of 15.5% in the S&P 500 over the same period...TXI is trading at 14.9x our EBITDA estimate for FY2010 (ending next May) and 13.6x our number for 2011. This is well above TXI’s historical average as well as the multiples at which the company’s peers trade today. And, indeed, the valuation is worse now than when we cut the rating, since the decline in TXI’s share price is outweighed by the 21.4% reduction in our FY2010 EBITDA estimate over the same period...Our $22.8MM EBITDA estimate for 2Q2010 is near the low on the Street; consensus is $25.6MM. Our $97.8MM number for FY2010 is the low estimate and compares to the consensus of $111.3MM."

"It appears to us that investors are looking to a general economic recovery, and are trying to price in the trough in TXI’s results. We also suspect that many investors are relying on TXI’s tangible book value, which is currently north of $28/share, as a floor. All that having been said, in the absence of a major catalyst (that is, with the proxy fight, director elections, and lots of estimate cuts behind us), we are unwilling to continue with our Reduce/Sell rating."

To see all the upgrades/downgrades on shares of TXI, visit our Analyst Ratings page.

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