Morgan Joseph Upgrades Calgon Carbon (CCC) to Hold

July 10, 2008 8:59 AM EDT

Morgan Joseph upgrades Calgon Carbon (NYSE: CCC) from Sell to Hold based on valuation. Calgon Carbon’s shares have fallen approximately 30% from their 52-week high of $20.23 (posted on 6/16/08) and the stock is trading near Morgan Joseph's $14 price target.

The firm said, "The stock currently trades at 14.7x our FY08 EBITDA estimate and 12.6x our FY09 EBITDA estimate. In our opinion, shares of Calgon Carbon are now more reasonably priced given our forecast for the company's earnings growth going forward. Regulatory concerns regarding the Clean Air Mercury Rule can cause a degree of uncertainty regarding full recognition of revenue and profitability related to mercury removal from the electric utilities. While our 2008 EPS estimate reflects Y/Y growth of more than 35%, our 2009 EPS projection assumes the company's earnings growth slows to a rate below 25%."

Long term, the firm believes that Calgon Carbon will be ideally positioned to serve the electric utility market. The firm also highlighted that "the demand for activated carbon should surpass supply, with electric utilities procuring activated carbon to meet mercury removal requirements for coal-fired power plants." However, Morgan Joseph remains cautious because of the EPA overruling the Clean Air Mercury Rule and due to the uncertainty created with regard to the timing of mercury removal related revenue.

Calgon Carbon Corporation (Calgon), is a provider of products, and solutions for purifying water and air.

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