(RTTNews) - Friday, FBR Capital Markets upgraded Cooper Industries plc (CBE: News ) shares to Market Perform from Underperform and increased its price target to $44 from $35. The brokerage raised its 2010 EPS estimate to $2.70 from $2.40.

Analyst Deane Dray noted that even as the outlook for commercial construction end markets remains weak, his more constructive outlook of the shares now reflects the benefits of the aggressive restructuring and cost-cutting being orchestrated by Cooper CEO Kirk Hachigian and team. Together, they have trimmed the cost structure in line with lower volume.

The analyst said that he is also incrementally more positive on Stimulus spending, where he could see some actual contracts being awarded over the next several months, albeit yet small, beyond just the headline news.

The analyst sees evidence of solid execution where, despite a 23% organic decline in third quarter. Electrical revenues, operating margins increased 150 basis points sequentially to 15%+. Solid FCF generation well above 100% of net income and a healthy 16% net debt-to-cap give the company ample flexibility to pursue acquisitions.
The analyst added that the bear case on Cooper remains centered on commercial construction, 25% of revenues. It is hard to say that commercial construction exposed companies have all the expected negative impact priced in when the falloff in 2010 has really taken hold yet. That said, the analyst expects Cooper has more offsets in its arsenal, such as the lighting retrofits, international markets, and electricity grid spending.

Currently, CBE is down $0.15 or 0.35% and trading at $42.78.

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by RTT Staff Writer

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