Barclays Reinstates Jarden With Overweight Rating, $54 Target

• Barclays analyst Lauren R. Lieberman and her team reinstated Jarden Corp JAH with an Overweight rating and a $54 price target.
• The experts assure that, taking some distance, they feel like “short term disappointment on 2016 earnings is overshadowing a still evolving (revenue) growth story.”
• Despite the strong rating, shares of Jarden were trading down on Monday morning.

In a report issued Monday, Barclays analyst Lauren R. Lieberman and her team reinstated Jarden with an Overweight rating and a $54 price target, which implies an upside potential of almost 12 percent from the stock’s opening price on Monday. The firm argues that, disappointed by 2016 earnings, investors are not fully appreciating a (revenue) growth story that is still evolving.

Since Jarden announced it would acquire The Waddington Group in July, the stock has lost about 12 percent (compared to a flattish S&P 500) and its absolute P/E multiple fell almost 4 turns. The experts explained that, “market-wide de-risking and less interest in M&A stories has caused some of the pain, but with the SMID-Cap Staples average P/E down only ~1x over the same time period, it’s clear that there have also been more Jarden-specific dynamics at play.”

Moreover, they noted that, although the flow through of M&A accretion from the acquisitions of Waddington Group & Jostens has “surely been less than many would have assumed due to financing decisions,” they still think the real overhang has been the reduction to underlying 2016 guidance.

Having said this, while the firm does not see any near-term catalysts for shares to recover “outside of any macro comfort with SMID-Cap names,” the experts do think that, “as we move through 2016 and see the growth yield of Yankee Candle and other legacy businesses, Jarden will return to investor radar screens as a fundamentally compelling, not just M&A based, story.”

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.