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.