CS First Boston upgraded Covenant Transport (CVTI ) to buy from hold.
Analyst Gary Yablon says his upgrade was based on company-specific operating trends which he believes will increase long term profitability. He believes the market sees 13% long term EBITDA growth with 23% incremental ROIC for the company vs. his 14% EBITDA growth, and 26% ROIC estimates. He thinks it is impressive that the company increased utilization while reducing number of team driver set-ups. Yablon says Covenant has significant earnings per share potential to the $2.00 range if it is able to continue improving operations like it has been doing over the last six months. He thinks the company is trading at a discount to group. Yablon has a $24-$25 12-month target.