Tuesday, FBR Capital Markets downgraded Pike Electric Corp. (PIKE) shares to Market Perform from Outperform and lowered its price target to $11 from $15.
Analyst Alex Rygiel noted that Pike Electric announced first quarter of fiscal 2010 results that were below expectations. Lack of storm revenue coupled with excess costs related to its distribution business being carried during the slower economic period have weighed on recent results.
In addition, management withdrew guidance due to uncertainty in the market and its announced cost restructuring efforts. Although the analyst has been upbeat on Pike's initial diversification strategy, he finds it difficult to rate the shares an Outperform while visibility appears to have deteriorated.
As such, the analyst downgraded the stock to Market Perform until the restructuring efforts are complete and visibility improves. The analyst lowered his price target to $11 (from $15), which represents 6.5x his calendar 2010 EV/EBITDA estimate, which is a discount to where its electric utility contracting peers are currently trading based on less exposure in the higher-growth transmission market.
Currently, PIKE is down $2.27 or 18.41% and trading at $10.09.
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