Wedbush Reiterates Outperform On Mueller Water Products, Sees 21% Upside


In a research report issued today, Wedbush analyst David Rose reiterated an Outperform rating on Mueller Water Products (NYSE:MWA) with a price target of $12, which implies an upside of 21% from current levels.

Rose said, “On November 25, Mueller Water Products announced that it refinanced its long-term debt. As previously noted, the company had announced a tender for its 8.75% and 7.375% notes, refinancing them with a $500 million seven-year term loan (ABL) at a rate of LIBOR + 325, with a 0.75% LIBOR floor. With the debt refinanced, the company not only saves $22 million annually in interest expense, but has greater flexibility in M&A.”

The analyst explained his price target, “In valuing these shares, we look at peer group multiples to EBITDA and our DCF model. Given MWA’s leverage and cyclicality of the business, balanced by leading market position, operating leverage, and improving fundamentals, we use a slight discount to peer group multiple and apply 10.8X on our FY15 EBITDA. Our DCF model suggests a lower valuation owing to the higher beta of the shares. Incorporating these methodologies, we arrive at a 12-month price target of $12.”

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst David Rose has a total average return of -26.8% and a 70.0% success rate. Rose has a 18.9% average return when recommending MWA, and is ranked #3360 out of 3388 analysts.

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