Baird Raises TrueBlue To Outperform, Cites 'Turn In Execution' - TrueBlue (NYSE:TBI)

Shares of Trueblue Inc TBI have risen 21.83 percent year-to-date, reaching a high of $31.27 on June 22.

Baird’s Mark S. Marcon has upgraded the rating on the company to Outperform, with a price target of $28.

Marcon believes that the current valuation of the stock is attractive and the risk-reward is favorable, while the outlook is better than anticipated, with easing comps.

Analyst Mark Marcon explained that the risk-reward appears more favorable due to the significant shift in business momentum, with robust growth across all service lines driven by better sales execution.

“While softness in manufacturing persists, construction inflected quite nicely along with a pickup in SMB market activity leading to a solid improvement in core legacy growth,” Marcon mentioned.

Results And Drivers
Trueblue reported robust Q3 results ahead of expectations, driven by a broad and meaningful change in the momentum across all the company’s service lines. While the revenue came in ahead of the consensus and the estimates, the non-GAAP EPS was slightly lower than expected, driven by additional customer costs of $2 million for RPO implementation.
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Staffing services were also ahead of the estimate, while the on-premise business remained strong, continuing to grow ahead of the branch business. “SMB client activity picked up in September and continued into October, accounts for roughly 50 percent of gross profit,” Marcon reported.
Managed services also came in ahead of the estimate, while the gross margin fell 50 bps year-on-year, “As SMX growth continues to outpace core legacy growth and workers compensation 20bps higher” year-on-year, Marcon stated. Margin pressure is likely to continue, with SMX growth outpacing core growth.

Looking Ahead

Trueblue’s Q4 guidance also exceeded the consensus and the estimates, which suggests that the “momentum has clearly shifted,” the Baird report added.

The FY15 and FY15 revenue and EPS estimates have been raised.
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