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UPDATE: Bank Of America Downgrades Roundy's On Rainbow Sale Dilution


In a report published Friday, Bank of America analyst Robert F. Ohmes downgraded the rating on Roundy's (NYSE: RNDY) from Buy to Neutral, and lowered the price target from $8.00 to $6.00.

In the report, Bank of America noted, “We are lowering our rating on RNDY from Buy to Neutral. RNDY reported F1Q same-store sales (-5.2%) well below our forecast and is guiding for continued samestore sales pressure through 2014. RNDY has also suspended EPS guidance for the full year. We are lowering our 2014 estimate to $0.11 (from $0.34) and 2015 estimate to $0.30 (from $0.45) to incorporate expected dilution from RNDY's announced agreement (signed yesterday) to sell 18 Rainbow stores for $65mn (at an estimated multiple of roughly 4x EBITDA). Our price objective goes to $6 (from $8), 20x our new 2015E EPS, and implying an EV/EBITDA multiple of 7x.

"We believe RNDY's valuation is still supported by the growth potential of the Mariano's banner in Chicago, as well as our discounted cash flow analysis (assuming an 8% expected return and 6x terminal value EBITDA multiple).”

Roundy's closed on Thursday at $4.85.

Latest Ratings for RNDY

Nov 2015JefferiesMaintainsHold
Nov 2015Deutsche BankMaintainsHold
Aug 2015Bank of AmericaMaintainsUnderperform

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Posted-In: Bank of America Robert F. OhmesAnalyst Color Downgrades Analyst Ratings

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