Morgan Keegan downgraded La-Z Boy (LZB) to underperform from market perform.
Analyst Laura Champine says La-Z Boy cited in a10-K: "significant competition, worldwide overcapacity, increased raw material costs, import pressures" as the many factors making margin expansion difficult.
The company also says it's well-positioned to capitalize on any increased demand for their furniture. Champine thinks the key phrase is "their furniture," as she doesn't believe La-Z Boy is participating in an industry recovery that's underway.
She cut the $1.27 fiscal 2005 (Apr.) EPS estimate to $1.10. She sees $1.13 fiscal 2006 EPS. She recommends investors sell the shares given the risks to her near-term estimates as well as the long-term competitive risks.