Will This Downgrade Hurt Lumber Liquidators (LL) Today? (Update)

Update (9:40 a.m.): Updated with Thursday market open information and Jefferies quote.

NEW YORK (TheStreet) -- Jefferies reduced its target price on Lumber Liquidators  (LL) to $124, reduced its EPS and set a "buy" rating. The firm noted near-term disruptive weather, but potential margin expansion down the road.

"We reiterate our Buy rating. Weather issues are fleeting and do not impact our LT view," Jefferies wrote in its research note. "With high short interest, we may have seen some short covering today as management did not lower full year 2014 guidance despite a soft start to the year as weather impedes business. Further, management reiterated its belief that there is further gross margin opportunity going forward as it improves sourcing, transportation and its mix of customers."

The stock was rising 0.21% to $100.79 shortly after the market opened on Thursday.

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Separately, TheStreet Ratings team rates LUMBER LIQUIDATORS HLDGS INC as a "buy" with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate LUMBER LIQUIDATORS HLDGS INC (LL) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth, compelling growth in net income, notable return on equity and expanding profit margins. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 6.8%. Since the same quarter one year prior, revenues rose by 24.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • LUMBER LIQUIDATORS HLDGS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, LUMBER LIQUIDATORS HLDGS INC increased its bottom line by earning $1.68 versus $0.93 in the prior year. This year, the market expects an improvement in earnings ($2.75 versus $1.68).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Specialty Retail industry. The net income increased by 58.3% when compared to the same quarter one year prior, rising from $12.88 million to $20.40 million.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Specialty Retail industry and the overall market, LUMBER LIQUIDATORS HLDGS INC's return on equity exceeds that of both the industry average and the S&P 500.
  • 41.83% is the gross profit margin for LUMBER LIQUIDATORS HLDGS INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 8.02% is above that of the industry average.
  • You can view the full analysis from the report here: LL Ratings Report

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