Avondale upgraded shares of Libbey (LBY) to market outperform, after the company said it plans to buy the remaining 51% of its Latin American glass making business.
Analyst Douglas Lane says the company will pay $80 million in cash and assume $65 million in debt to fully own its Mexican joint venture Vitrocrisa. He says that with 100% of Vitrocrisa, Libbey seems to be getting the flexibility it needs to stop its profit erosion. He acknowledges that the company has struggled to meet projections lately. Still, if the numbers outlined in today's press release for estimates 2007 (in example earnings before interest taxes (EBIT) of $55 million to $65 million) come anywhere close to fruition, then he thinks the stock could rally back to prices in the double digits pretty quickly. He calculates that $60 million in EBIT equates to something around $1.50 in earnings per share (EPS.)