Anixter International Receives Rating Boost For These 3 Reasons

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Imperial Capital has upgraded Anixter International Inc. AXE to Outperform from In Line following the third-quarter earnings beat, the company's announcement of the largest contract in its history and signs of macroeconomic easing.

Anixter’s third quarter adjusted EPS of $1.38 topped consensus view of $1.36, and Imperial’s estimate of $1.27. The revenue of $1.96 billion was consistent with Imperial and Street estimate of $1.97 billion.

The company also announced its largest-ever contract: a $750 million, five-year contract to be a distributor of utility products and services serving a large electric utility company. This represents an estimated $100 million/year in incremental revenue.

“We believe that the company is moving past the initial integration challenges, and is now improving its cross-selling capabilities, which supports our more positive view of the shares. One significant unknown that could impact the valuation is the macro economy, to which the company is highly sensitive,” analyst Jeff Kessler wrote in a note.

Kessler noted that Anixter’s industrial and Original Equipment Manufacturing (OEM) businesses could witness higher sales on increased global infrastructure investment.

As such, the analyst increased his EPS estimates for 2016/2017/2018 to $4.81/$5.16/$5.41 from $4.59/$4.80/$5.05, respectively.

Kessler also upped his price target to $72 from $64 and the revised target is about 11 percent above Wednesday's closing price of $64.90.

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Posted In: Analyst ColorEarningsLong IdeasUpgradesPrice TargetContractsAnalyst RatingsTrading Ideasimperial capitalJeff Kessler
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