UPDATE: Stifel Nicolaus Reduces PT to $7 on Student Transportation on Diluted Cash Flows

Stifel Nicolaus reiterated its Buy rating on Student Transportation STB following a good quarter, but reduced its price target from $7.20 to $7 as bondholders convert to equity, causing dividend outflow to increase in the future. Stifel Nicolaus noted, "A majority of the company's outstanding 7.5% Convertible Subordinated Unsecured Debentures were converted into common shares prior to the company's redemption—a negative for future cash flow, in our view. This results in lowered interest expense going forward but higher dividend payments associated with the increase in shares outstanding." Student Transportation closed at $6.27 on Monday.