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Dorel Industries Downgraded To 'Sector Performer' By CIBC, PT Lifted To $40

 November 09, 2012 02:38 PM


(By Balaseshan) CIBC World Markets analyst Mark Petrie downgraded rating of Dorel Industries Inc. (TSE: DII.B) to "Sector Performer" from "Sector Outperformer" while increasing price target to $40 from $33.

Dorel reported solid Q3 results, with revenues and gross margins in both Juvenile and Recreational/Leisure coming in ahead of Petrie's forecast. Higher operating expenses in R/L and corporate, along with weakness in the Home Furnishings unit, held earnings in line with the analyst's expectations.

Dorel stock has performed extremely well since the company announced its Q2 results and doubled its dividend. Though the analyst believes the dividend has been a significant factor for investors, the fact remains that the business segments are delivering solid results.

[Related -Toll Brothers Inc. (TOL) Q3 Earnings Preview: Big Beat, Small Move?]

Petrie has made only minor adjustments to forecasts, with slightly higher revenue expectations for Juvenile and Rec, along with somewhat higher operating expenses. The analyst's EPS estimates remain unchanged for both 2012 of $3.21 and 2013 of $3.71.

Petrie has increased target multiples on Dorel to an average of 11 times price-to-earnings and 7.0 times EV/EBITDA (from 9.5 times and 6.0 times, respectively). The analyst's price target is increased from $33 to $40, based on 2013 estimates.

DII.B is trading up 1.27% at $38.18 on Friday.

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