Jefferies Calls Shares of A. M. Castle (CAS) Undervalued, Sees Tube Supply as 'Good Strategic Fit'

Jefferies is reaffirming its Buy rating and $17 price target on shares A. M. Castle (NYSE: CAS) following its recently closed acquisition of Tube Supply.

The firm believes Tube Supply will be a "good strategic fit" for the company as it over doubles CAS's oil and gas market and raises the company's average margins.

An analyst at Jefferies comments, "Though at the low end of our initial range, we expect the acquisition and related financing to be accretive to 2012 EPS, but note potential dilution in later cycle estimates should its notes be converted. In each case, valuations are notably attractive at current levels based on our earnings estimates for the combined company."

Jefferies is forecasts the acquisition will be accretive to the company's FY12 earnings and is raising its FY12 EPS estimate from $1.25 to $1.42. The firm is also increasing its FY13 estimate from $1.85 to $1.94. Total sales for FY12 and FY13 is now estimated to be $1.43 billion and $1.51 billion.

For an analyst ratings summary and ratings history on A. M. Castle click here. For more ratings news on A. M. Castle click here.

Shares of A. M. Castle closed at $9.28 yesterday.

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