Wednesday’s analyst upgrades and downgrades

Wednesday’s analyst upgrades and downgrades DAVID LEEDER PUBLISHED 1 HOUR AGO COMMENTS SHARE SAVE FOR LATER Listen to this article Learn more about audio Log in or create a free account to listen to this article. Inside the Market’s roundup of some of today’s key analyst actions National Bank Financial analyst Zachary Evershed thinks Richelieu Hardware Ltd.’s (RCH-T -0.37% decrease ) recent deal for The Penrod Company’s hardware division, which is its largest acquisition to date, expands its U.S. door presence and enables cross-selling of products already offered in Canada. “We estimate total consideration at US$70-million ($100-million), roughly 1 times P/S,” he said. “Margins are expected to be broadly in line with RCH’s, implying a transaction multiple above RCH’s typical 4-6-times EBITDA acquisition range. Integration is expected to be approached with a light touch, maintaining Penrod as somewhat of a standalone operation given its distinct customer base. While Penrod immediately satisfies the company’s $100-million annual acquired sales target, RCH intends to continue pursuing M&A. We see pro forma Net Debt/EBITDA rising to 1.5 times from 1.3 times, leaving meaningful capacity for future acquisitions.” He adjusted his third-quarter forecast for the Montreal-based specialty hardware distribution and manufacturing company to reflect the close of the deal and the announcement of a $15-million-plus expansion of its Drummondville distribution centre. While his sales projection rose to $538-million (versus the consensus of $536-million), he cut his EBITDA estimate to $60.3-million (versus $60.7-million) and EPS to 46 cents (versus 48 cents) “as tariff passthroughs are expected to weigh on margins.” In a client report released Wednesday, Mr. Evershed also introduced his 2028 estimates, but he warned a “more bearish near-term backdrop for housing keeps our [the] rollout muted.” “Home Depot and Lowe’s both attended a U.S. consumer and retailer conference on September 15, providing valuable readthroughs for RCH’s sales to retailers,” he said. “HD indicated no clear H2 inflection in housing or consumer demand. Management noted that consumers still have the means to spend but remain cautious given elevated interest rates, inflation, fuel prices and employment concerns, resulting in continued deferral of larger discretionary projects. LOW indicated H2 is expected to look broadly similar to H1, with no meaningful improvement or deterioration in the…