Legg Mason downgrades Celadon Group (CLDN) to buy from hold on valuation.
Analyst John Larkin says his downgrade was based mainly on valuation. With Celadon shares trading in the vicinity of his previous $23 12-month target price, he doesn't see a sufficient upside potential over the coming 12 months to warrant the continuation of a buy rating.
He notes a permanent valuation multiple expansion is unlikely, until growth returns and margins expand faster than expected, and/or operating lease-adjusted balance sheet leverage is further reduced.
Larkin would look to buy the company's shares should price drop to $19 or below, all else being equal. He sees $1.10 fiscal 2005 (ending June) earnings per share and $1.37 fiscal 2006.