Interline Brands Down After Downgrade To 'Neutral'

NEW YORK (AP) — Interline Brands Inc. shares fell Tuesday after an analyst downgraded the stock, saying the recession will continue to hurt the company's customers.

SunTrust Robinson Humphrey analyst Keith Hughes lowered his rating on the Jacksonville, Fla.-based distributor of building repair and maintenance products to "Neutral" from "Buy." He also trimmed 3 cents from his 2009 earnings estimate to 81 cents per share.

Vacancy rates at apartment buildings are particularly disturbing, Hughes said, as the apartment supply business accounts for 25 percent to 30 percent of Interline's sales.

In the first three months of 2009, apartment vacancy rates rose to 7.2 percent from 6.2 percent last fall, and some see that number rising past 8 percent, the highest level since the 1970s, Hughes said.

Even non-residential markets are going to experience a "substantial slowdown," Hughes said.

Furthermore, given that Interline's shares have jumped 70 percent since hitting a March low of $6.34, Hughes said the stock is likely to stay flat for some time.

Interline Brands reports first-quarter earnings on May 4. Its shares fell $1.02, or 9.1 percent, to $10.17 in afternoon trading.

Also on Tuesday, rival maintenance-products distributor W.W. Grainger Inc. said its first-quarter profit fell more than 15 percent, while revenue slid 12 percent from last year.

"We do not believe that we've seen the bottom to the sales decline and expect increased pricing pressure throughout the remainder of the year," said James Ryan, chief executive of W.W. Grainger.