UPDATE: D.A. Davidson Upgrades Hillshire Brands to Neutral, Raises PT
In a report published Friday, D.A. Davidson upgraded its rating on Hillshire Brands Co. (NYSE: HSH) from Underperform to Neutral, and raised its price target from $20.00 to $32.00.
D.A. Davidson noted, “We are raising our EPS estimates to $1.65 for FY13 and FY14, previously $1.45 and $1.40, respectively. We think margins will come under pressure in the 2H relative to the 1H and in FY14 relative to FY13. As hog prices rise to recover higher feed costs, margins in hog processing will likely come under pressure. Yet it is clear the company's cost reduction efforts have had more impact than we previously envisioned. We are upgrading the shares to NEUTRAL from Underperform and raising our price target to $32, previously $20, which is 19.4x our FY13 estimate. This seems like an aggressive valuation but with the EPS beat, we don't see much downside in the shares.”
Hillshire Brands Co. closed on Thursday at $31.02.
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