Wednesday, KeyBanc Capital downgraded Myers Industries Inc. (MYE) shares to Hold from Buy. The brokerage raised its 2009 EPS estimate to $0.63 from $0.60.
Analyst Christopher Manuel attributed the downgrade based on a risk/reward profile that he believes has become more balanced in relation to its packaging peers.
While the analyst is confident MYE is solidly executing on its restructuring initiatives in Lawn & Garden and productivity initiatives in Material Handling, the benefit from these programs in 2009 appears to be reflected in shares.
The analyst also views the recent announcement of seeking strategic alternatives for the Auto & Custom segment favorably as he believes the business would likely be more profitable to other parts suppliers as a consolidation play.
A divestiture would improve total company operating margins and ultimately return on capital through the cycle. As the analyst near 2010, he believes even a modest recovery in demand in Material Handling and Lawn & Garden would be highly leverageable given MYE's efforts to right size its cost structure.
However, at this point, the analyst is reluctant to assume a meaningful economic recovery in his estimates and thus have remained cautious regarding the 2010 outlook with primary earnings improvement due to restructuring cost savings.
Having said this, the analyst raised 2009 estimate to include some early benefits from productivity initiatives in Material Handling. On the analyst's new 2009 estimate, shares are trading at 5.9x EBITDA (modestly below peers at 6.5x) and 17x earnings (above peers at 14x).
Currently, MYE is down $0.79 or 7.40% and trading at $9.88.
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