KeyBanc Weighs In Positively On Industrials
KeyBanc analyst Jeffrey D. Hammond and associates view the non-residential construction market has a recovery underway. Hammond believes the upper end of prevailing industry forecasts for 2014 non-residential construction spending are well within reach in the high single-digit range. Hammond supports the recovery idea by breaking down an analysis of both Lennox and Watts.
Hammond upgraded Lennox to a Buy rating from Hold and initiated a $100 price target based on the confluence on favorable end market conditions, clear evidence of persisting share gains in its Residential Heating & Cooling business, continued runway of margin enhancement opportunities and a capital allocation strategy primarily focused on returning cash to shareholders.
Hammond states that the aforementioned catalysts, coupled with a recent pull back in its share price, should support outperformance and a premium valuation going forward.
Watts Water Technologies was upgraded to Buy from Hold and received an initial $65 price target based on the company's favorable end market exposures, supportive and ongoing growth in Residential, and a wider runway in Europe thanks to easier core compares. Hammond also has a constructive view on Watt's new management in place, claiming they will bring a wealth of operational improvement and emerging market experience to the firm's current operations.
Lennox and Watts shares seemed to be reacting favorably to the upgrade, with Lennox trading up 2.88 percent to $90.41, and Watts trading up 2.88 percent to $60.24.
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