Monday, KeyBanc Capital Markets initiated coverage of RC2 Corporation (RCRC) with a BUY rating and established a price target for the company's stock at $18. The brokerage said share price under performance over the past six months has created an attractive valuation.
The firm noted that investors' concerns surrounding the loss of a portion of the Thomas license and the uncertainty surrounding an impending acquisition now adequately discounted in the stock price. It also believes that the introduction of new products over the next year as well as the potential announcement of an accretive acquisition should provide upside catalysts for the stock.
Further, analyst Scott Hamann said improving visibility in future growth initiatives has created a compelling risk/reward scenario. KeyBanc said the company has a significant amount of exposure to end markets related to prenatal care through the mother, infant & toddler segment, unlike many of its toy company peers.
As such, the brokerage introduces 2009, 2010 and 2011 earnings per share estimates of $1.45, $1.50 and $1.70, respectively.
On Monday, the stock closed at $14.46.
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