(By Balachander) Buckeye Technologies Inc. (NYSE:BKI) shares were upgraded to "Buy" from "Neutral" by UBS Securities analyst Gail Glazerman, who cited sell-off.
"While macro uncertainty has increased, we believe recent pressure in BKI shares is overdone and under-estimating the value in BKI's business, internal restructuring/growth efforts and strength of its balance sheet," Glazerman wrote in a note.
The company's shares have sold off 27 percent from the late-January record-high. The S&P 500 is off only 11.5 percent over this period. BKI's share price is essentially back to levels seen during the market sell-off last October, Glazerman said.
Glazerman has a price target of $36.00 on shares of the Memphis, Tennessee-based maker of cellulose-based specialty products.
While there is macro sensitivity/risk in BKI's business, their end-markets are typically less sensitive than commodity grades. BKI's wood specialty prices are fixed through December, the analyst noted.
"While we maintain (and model) a cautious medium-term outlook, fluff pulp prices are currently recovering (up 5 percent since March)," Glazerman said.
Glazerman said he has been fairly cautious modeling benefits from BKI's internal initiatives. BKI just completed the energy project at Foley which should add $4mm annual EBIT, with potential for further $7mm over time.
In December, BKI will close the Delta nonwovens plant and transfer much of the business to other BKI sites. This should improve profitability, the analyst noted. Work has started on project to convert some fluff to dissolving (target +$20mm EBITDA). BKI expects to end FY12 with no net debt.
The company?'s products are used in personal hygiene products, oil filters, thickeners and papers among others.
The stock, which has been trading in the 52-week range between $22.45 and $38.50, added 0.96 percent to trade at $27.39 on Monday.