J.P. Morgan Lowers Price Target on Georgia Gulf (GGC)

J.P. Morgan is out with a research report this morning, where it reiterates its Overweight rating on Georgia Gulf GGC; it also lowered its price target on the name to $19.00, from $20.00. The JPM analysts cited the company’s recent earnings report, which were better than expected; this was due primarily to higher year over year PVC prices, slightly higher volumes, and widening PVC margins due to the benefits of sequentially lower ethylene and natural gas costs. The analysts raised 2010 EPS estimates to a loss of $0.10, from a loss of $0.20. Their EBITDA estimates were raised very slightly as well. The analysts believe that GGC represents good value on a risk reward basis as the company has no debt maturities before 2014 and is trading at 4.7x 2011 EBITDA. They added, “Current net-debt-to-EBITDA is 3.8x based on our 2010 estimates, and EBITDA to interest expenses is 2.4x for 2010. We expect GGC to generate $1.77/share in free cash flow in 2010, or 13% of the current share price. We introduce a December 2011 price target of $19 based on a 2011 EV/EBITDA multiple of 5.5x. GGC is positively disposed to a recovery in the housing cycle, and its chlorovinyls and building product business units are capable of materially better results in an improved economy.”