Found this at the WSJ site:
>> Royal Group Stk Down After Cautious Conference
Call
By SCOTT ADAMS
Dow Jones Newswires
TORONTO -- Royal Group Technologies Ltd. (RYG) shares are down 5.5% in
Toronto Wednesday after the company took a more cautious tone with analysts on a
conference call following the release of third-quarter results Tuesday.
For its third quarter ended June 30, the maker of plastic building products reported
net income of 48 Canadian cents a share, not including a writedown of 3 Canadian
cents, on revenue of C$304.1 million.
Results were in line with expectations and showed 20% growth from year-earlier net
income of 40 Canadian cents a share. But the company indicated that growth in the
fourth quarter and in fiscal 1999 may be slower than anticipated.
"The tone (in the conference call) was a little more cautionary in the possible
slowdown in the U.S. and Canadian economies," said Greg Misztela, analyst with
Griffiths McBurney Partners. What is also happening, he said, is that multiples on
housing stocks are falling to reflect anticipation of a slowdown in the North American
economy.
The conference call prompted CS First Boston analyst Ivy Zelman to lower her rating
on the stock to "buy" from "strong buy."
Zelman lowered her fourth-quarter earnings estimate to 52 Canadian cents a share
from her previous estimate of 55 Canadian cents a share. As well, she lowered her
fiscal 1999 net income estimate to C$1.84 a share from her previous estimate of
C$1.90 a share.
Zelman is now expecting revenue growth of 25% in the fourth quarter, down from her
previous forecast of 32%. For fiscal 1999, she has lowered her revenue growth
expectation to 22.5% from her previous expectation of 25%. Her research note says
the company is expecting 25% to 26% revenue growth in the fourth quarter and 20%
to 25% in fiscal 1999.
She lowered her price target on the stock to US$30 to US$31, based on a multiple
of 23 to 24 times her calendar 1999 earnings projection. She lowered her multiple to
reflect slower growth rates.
In Toronto Wednesday, the stock is off 2.05 to 34.95 on about 950,000 shares. In
New York, the stock is off 1 3/8 to 23 1/4 on 236,000 shares.
CS First Boston analyst Ivy Zelman also said in her research note that Royal Group
Technologies Ltd. (RYG) has delayed the opening of a plant in China because of the
potential economic slowdown there and is experiencing problems because of the
construction strikes in Ontario. Royal Group officials couldn't immediately be reached
for comment.
Despite the downgrade, Zelman's note says she is still positive about the long-term
growth prospects for the company. Griffiths McBurney & Partners analyst Greg
Misztela is positive as well.
Before the results were released, Misztela rated the stock "accumulate" with a C$43
price target. "Anywhere between C$33 and C$35 the stock is a buy," he said, adding
that he hasn't changed his opinion on the company after Tuesday's news.
Royal Group stock hit a 52-week high of 48.00 in April on the Toronto Stock
Exchange, but has fallen sharply since then to its current level of 35.00. It traded
above C$42 at the beginning of July.
-By Scott Adams; 416-943-7800 << |
