Friday, KeyBanc Capital upgraded Gibraltar Industries, Inc. (ROCK) shares to Buy from Hold with a price target of $15. The brokerage raised its 2009 per share estimate to profit $0.15 from loss $0.40, and its 2010 EPS estimate to $1.15 from $0.42.
Analyst Mark Parr said that his upgrade, and estimate revisions come via ROCK's better than expected second quarter results, reflecting stable to improving residential remodel and new construction, 50%+ of sales, end markets, as well as traction with new product acceptance in both residential and commercial end markets.
At the analyst's price target of $15, ROCK shares represent an EV/EBITDA multiple of 6x on his revised 2010 estimate, near the low end of a normalized historical 6-8x range, reflecting sustainability risk of positive revenue momentum in Building Products. At the market price of $10.96, ROCK shares garner 4.9x EV/EBITDA on the analyst's 2010 outlook.
The analyst noted that second quarter results revealed much stronger than expected bottom-line impacts from the aggressive restructuring initiatives undertaken over the last several years, dramatically reducing the company's breakeven point and better positioning it to be "the low-cost producer" within its served market niches.
The analyst said that improving domestic automotive markets, 10%-15% of sales, along with higher strip steel prices, should carry Processed Steel back into the black in second half of 2009/2010. The confluence of improvement in key end markets, sustainable benefits from fixed cost reductions, and ongoing easing in financial risk support the analyst's positive view on ROCK shares.
Currently, ROCK is up $1.41 or 12.86% and trading at $12.37.
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