TrueBlue Downgraded By Deutsche Bank On Macro Concerns

• Trueblue Inc TBI shares have dipped 20 percent since July 17, from above $30 to around $22 in August.
• Deutsche Bank’s Paul Ginocchio downgraded the rating on the company from Buy to a Hold, while reducing the price target from $30 to $26.
• While the Street is expecting the company to generate revenue acceleration, it is more likely to decline, in view of macro data, Ginocchio said.

Analyst Paul Ginocchio expects Trueblue’s earnings to be lower than was earlier anticipated, given the deceleration in key macro data and “our view that the US is in the late cycle.” There is unlikely to be any upside to Street estimates. In fact, Trueblue’s revenues are likely to miss the consensus expectations.

The ASA Staffing Index has declined from flat y/y in 2Q to -3 percent y/y in 3Q. This deceleration could be an indication of all staffers, Ginocchio said, while adding that Trueblue is witnessing additional headwinds from slowing ISM Manufacturing Employment.

The EPS estimate for 4Q has been reduced from $0.54 to $0.53. The EPS estimate for 2016 has been reduced 7 percent, from $2.12 to $1.98.

In the report Deutsche Bank noted, “Some readers may wonder why we are not more negative since we are assuming rev deceleration. At 12.6x our ‘16E EPS, the multiple is already pretty contracted. We would need to be more confident of a US recession to be more negative.”