UPDATE: FBR Capital Markets Initiates Coverage on Knowles Corporation as Competitive Pressures Mount

In a report published Friday, FBR Capital Markets analyst Christopher Rolland initiated coverage on Knowles Corporation (NYSE: KN) with a Market Perform rating and $21.00 price target.In the report, FBR Capital Markets noted, “We believe that Knowles Corporation's microelectromechanical systems (MEMS) microphone franchise holds some competitive advantages, including scale, intellectual property, and packaging techniques, but that competition has begun to intensify and that competitors may eventually capture a larger portion of Knowles' incumbent market share. Given our assumption for rising global microphone units (+10% CAGR year over year until decade-end) and declining ASPs (–4% to –5% CAGR until decade-end), mixed with modest Knowles market share losses (approximately 2% per year), we envision low-single-digit growth for the franchise (below the company's mid-term projection of approximately 7%). While we applaud the company's recent restructuring program and focus on operating efficiencies, we believe intensifying competition and the absence of substantial top-line growth make it difficult to drive meaningful EPS leverage. Therefore, we believe the stock warrants a multiple in line with the industry average.”Knowles Corporation closed on Thursday at $19.97.