KeyBanc Cuts Epicor Software to Hold from Buy

Says the company's acquisition of CRS Retail Systems creates new risks

KeyBanc downgraded Epicor Software (EPIC ) to hold from buy, explaining that the company's acquisition of CRS Retail Systems introduces additional execution risk over the near term.

Analyst Mark Schappel says the company's management is likely to spend the next two to three quarters sorting through integration issues. He believes cross-selling benefits from the deal are likely to be remote near term, as CRS and Epicor participate in different industries (CRS in retail and Epicor in manufacturing.) He says the deal is likely to pressure Epicor's operating margins over the next 12 months, albeit modestly. He also notes that Epicor's balance sheet is assuming net negative cash, which is unusual for a software vendor.

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