Thursday, KeyBanc Capital upgraded Gardner Denver Inc. (GDI) shares to Buy from Hold with a price target of $42. The brokerage raised its 2010 EPS estimate to $2.10 from $1.95.
Analyst Jeffrey Hammond noted that while industrial markets are still on the front end of a stabilization, he believes current valuation represents a solid entry point based on the long term, structural transformation at GDI. To that end, the analyst views the long-term story favorably, as the company has benefited from management changes and a sharpened focus on cost.
As the Company rationalizes its manufacturing footprint and fully integrates the acquisition of CompAir, the analyst sees a clear path to margin expansion in Industrial Products and believes that CEO Barry Pennypacker would achieve his stated target of 14% by 2014, which would add $1.30-$1.60 in earnings power assuming no recovery in volumes.
Moreover, the analyst believes that management is positioning the company well to better capture aftermarket opportunities through product redesigns, which should add a stabilizing factor to demand and bolster profitability mix.
As internal catalysts would support multiple expansion over time, though not reflected in the analyst's price target, and the company possesses enviable free cash generation, estimated ~$170 million in 2010, implying a ~9.5% enterprise FCF yield, he believes GDI is one of the best value names on his list, and is upgrading shares to Buy with a $42 price target.
Based on improving macro fundamentals in the Untied States and signs of stabilization in Europe, as well as increased confidence in margin execution in Industrial Products, or IPG, the analyst increased his 2010 estimates.
The analyst expects GDI to exit the year with margins near 7.5% in IPG and would anticipate margins remain near those levels in 2010, with some room for upside, based on the timing of cost savings, incremental $25 million, largely focused in IPG, and his view that industrial markets are likely to remain under modest pressure through first half of 2010, core sales -4% for IPG, down ~9% core for consolidated GDI.
The analyst expects a slow recovery in its Petroleum Pump business, which is reflected conservatively in his 2010 model. Additionally, the analyst believes management has properly managed expectations regarding the pace of recovery in this business.
Currently, GDI is up $2.38 or 7.19% and trading at $35.49.
For comments and feedback contact: editorial@rttnews.com
June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.