Seaport Global Securities Upgrades Commercial Vehicle Group (CVGI) to Buy

Seaport Global Securities upgraded Commercial Vehicle Group (NASDAQ: CVGI) from Neutral to Buy with a price target of $5.00.

Analyst Michael Shlisky commented, "We are upgrading CVGI to Buy, from Neutral, following our recent meetings with management. CVGI's new CEO seemed confident that the company's cost reductions, which were a significant proportion of the strong earnings beat last quarter, were not one-time in nature and in fact could accelerate from here as footprint rationalizations ramp, and a focus on standardization of processes across divisions and regions rolls out. Perhaps most importantly, management noted that the breakeven has been significantly reduced such that the company can still make money with revenues well below $150MM per quarter. As such, we are raising our estimates, as our prior model assumed that profitability would remain close to breakeven levels, even with revenues at $160MM or above in the coming quarters. We still believe there may be upside to our estimates in the near term, if management is able to execute as well in Q2/Q3 as it did in Q1 when decrementals were less than 10% (we currently model 15%). Our new price target of $5.00 (from $3.00) assumes an EV/EBITDA of ~6.5x our 2016 estimate, still short of the broader sector at ~8x given the risks, but above our prior multiple of ~6x given our increased confidence that the cost reductions are working. While an investment in such a volatile small-cap stock is not for the faint of heart, in our view, we believe the rewards outweigh the risks given the health of the balance sheet and good recent execution."

For an analyst ratings summary and ratings history on Commercial Vehicle Group click here. For more ratings news on Commercial Vehicle Group click here.

Shares of Commercial Vehicle Group closed at $2.68 yesterday.

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