Collins Stewart Starts Lumber Liquidators (LL) at Buy; Sourcing Initiatives Should Generate Significant Cost Savings

Collins Stewart initiates coverage on Lumber Liquidators (NYSE: LL) with a Buy. PT $26.00.

Collins analyst says, "The company began lapping last year’s botched implementation of SAP technology systems in Q3, and it faces easier comps in the coming quarters. We think benefits from recent sourcing improvements, including the completion of multiple line reviews and the acquisition of its major sourcing partner in China, should start to flow through in Q4 with the bulk of the margin impact coming in FY12. LL plans to utilize some of the cost savings from its sourcing initiatives to beef up promotional marketing and shore up opening price points. We are modeling for EPS growth of 61% in H2:11 following a 32% decline in H1:11.
Our forecast calls for EPS growth of 38% in FY12, and we are currently the high estimate on the Street. Based on our expectation of an EPS recovery gaining momentum in FY12, we believe LL shares are attractively valued at 12x our FY12 EPS estimate and 6x FY12E EV/EBITDA."

For an analyst ratings summary and ratings history on Lumber Liquidators click here. For more ratings news on Lumber Liquidators click here.

Shares of Lumber Liquidators closed at $15.68 yesterday.

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