KeyBanc Downgrades Forward Air Corporation's (FWRD) to Hold; Comments on EPS Outlook

October 22, 2009 7:29 AM EDT

KeyBanc downgrades Forward Air Corporation's (NASDAQ: FWRD) from Buy to Hold on Valuation.

KeyBanc analyst says, "Following Forward Air's 3Q09 earnings ($0.13 vs. ours/consensus estimate of $0.12), we are downgrading shares to HOLD from BUY on valuation. In our view, FWRD remains positioned to benefit from stabilizing/improving freight volumes and cost reduction initiatives, in addition to a potential pick-up in deferred airfreight volumes in response to lean inventories and supply-chain replenishment. However, at approximately 33x our 2010E of $0.75 (and within 5% of our previous $26 price target) we believe much of this optimism is priced in, potentially limiting further near-term upside. On a normalized earnings basis (20x normalized earnings of $1.20), shares are more attractively valued, and we remain constructive with our longer-term outlook.

"4Q09 was guided to $0.15-$0.21 on 10-15% decline in revenue, bracketing our $0.19 estimate and consensus of $0.18. However, qualitative commentary was optimistic with management indicating pricing has stabilized and airport-to-airport tonnage, pool distribution and truck brokerage revenue all firming late-September and into October...We are increasing our 2009 estimate to $0.46 (from $0.45) to reflect the outperformance in the quarter. Our 4Q09 and 2010 estimates remain under review pending Thursday's 10:00 a.m. conference call."

To see more analyst ratings on FWRD Click Here.

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