Following 77% Runup, Avondale Takes LSB Industries Off Its Conviction List

On May 12, LSB Industries, Inc. LXU announced the planned divestiture of its climate control business.

Avondale Partners’ Daniel J. Mannes maintained a Market Outperform rating on the company, while raising the price target from $15 to $17.

Off The Conviction List

Mannes removed LSB Industries from Avondale’s Conviction List, following the 77.5 percent surge in the share price over the past one week.

Related Link: LSB Industries Nearing The Gate Of El Dorado

“While we still see upside from the successful start of EDC and the ultimate refinancing of the company, some of this upside has now been garnered and the near term catalyst has played out,” the analyst mentioned.

An Expected Positive

LSB Industries stated the value of the climate control business at $364 million. Mannes estimated the value of the chemical business at $141 million, excluding corporate costs and said, “In the event of an ultimate sale of the remaining chemical business, shares could be worth upwards of $20.”

Mannes also believes that the earlier than anticipated divestiture of the Climate Control business was an “unexpected positive,” with the sale expected to close in Q3.

In addition, the analyst pointed out that it was important for LSB Industries to pay off all the senior notes, since that would pave the way “to refinance the preferred stock which needs to be repaid to allow for positive earnings in 2018.”