UPDATE: J.P. Morgan Downgrades Quality Distribution to Neutral, Lowers PT
In a report published Wednesday, J.P. Morgan & Co. downgraded its rating on Quality Distribution (NASDAQ: QLTY) from Overweight to Neutral, and lowered its price target from $8.00 to $15.00.
J.P. Morgan noted, “QLTY's 3Q EPS result was very weak and commentary regarding 4Q was downbeat. The 3Q results point to a much lower EPS run rate than we had been anticipating looking to 2013. Aside from the weakness in the base business exhibited in 3Q, our sense is that recent acquisitions, which had been a key to our Overweight thesis, may not be as profitable as we previously hoped owing to higher asset purchase accounting allocations and potentially lower utilization than we expected. And given this, we believe QLTY may slow its planned acquisition activity and focus instead in debt reduction. We do expect QLTY to continue to show better performance in its Chemicals Logistics business as it gradually ramps up the number of drivers and it faces easier driver comparisons; however, this expectation already resides in our estimates. For these reasons, we believe reward-to-risk will be fairly balanced – after what we expect to be an initial meaningful move down in QLTY stock in reaction to the 3Q result and 4Q outlook – and we lower our rating on QLTY to Neutral (from Overweight).”
Quality Distribution closed on Tuesday at $8.60.
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