- Goldman Sachs continues to be negative on Labor Ready (NYSE:LRW) reiterating their Sell rating on share ahead of 1Q2007 earnings to be announced on Thursday, April 18 (AMC). In firm's opinion, 2007 guidance and consensus estimates are too high given incremental housing weakness witnessed since the beginning of 2007. This note addresses the three primary areas of pushback from investors when they downgraded shares of Labor Ready on April 4: 1) Is this call too late? No. 2) Firm's $13 target price implies a new 52-week low - why? The housing market is at 52 week lows. 3) How does GSCO's below consensus estimate differ from the street? - They expect no 2H2007 recovery.
Catalyst: Labor Reay reports earnings on April 18. GSCO thinks 2007 EPS guidance of $1.25-1.30 is too high. The company cannot avoid negative earnings pressure due to its direct and indirect exposure to US residential construction activity. Since the beginning of 2007 firm's expectations for the US housing market have eroded; however, we have not, in firm's opinion, seen sufficient downward revisions to LRW guidance or Street estimates.
Notablecalls: Love the call! Wish the chart would agree with it more.
Catalyst: Labor Reay reports earnings on April 18. GSCO thinks 2007 EPS guidance of $1.25-1.30 is too high. The company cannot avoid negative earnings pressure due to its direct and indirect exposure to US residential construction activity. Since the beginning of 2007 firm's expectations for the US housing market have eroded; however, we have not, in firm's opinion, seen sufficient downward revisions to LRW guidance or Street estimates.
Notablecalls: Love the call! Wish the chart would agree with it more.
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