And now for the small-cap of the day:
Barclays (NYSE:
) is upgrading
Dana (NYSE:
) to Overweight from Equal Weight while raising their price target to $3.50 (prev. $2)
Firm notes they are upgrading DAN to OW, reflecting growing confidence that DAN will be able to avoid breaching its debt covenants, enabling investors to focus back on the fundamentals and recovery earnings power. DAN has solid liquidity, but the stock's valuation has been impacted by a large perceived risk of breaching covenants, which would allow its lender group to push the company into Chap 11.
While the firm does not forecast any meaningful volume recovery in the near-term, they expect a material rebound in earnings starting in 2Q09, driven by DAN's deep cost actions taken earlier this year, as well as a pick-up in Ford's production levels. This improvement, combined with the recent buyback of 10% of its debt, should enable DAN to clear its covenants.
Unlike AXL, DAN has not filed an 8-K indicating negotiations with its lenders, which should be a sign that DAN was in compliance as of June 30. This implies a solid 2Q EBITDA, which reinforces that DAN can stay in compliance for the year.
Notablecalls: Suspect 20%+ upside today may be in cards. AXL kinda worked, didn't it?
