Quality Distribution Surges 8% Amid Stifel Upgrade

Stifel upgraded Quality Distribution, Inc. QLTY Wednesday from Hold to Buy with a $15 price target.

Analysts led by John Larkin noted that “the company is performing well in its core business segment, Chemical Logistics. With nearly 70 percent of revenue coming from the company’s Chemical segment, Quality remains a good way to play the chemical renaissance currently underway in the U.S.

“As more and more producers take advantage of low-cost feedstock, massive numbers of new chemical plants and plant expansions are on the drawing board, or currently underway. This should provide a sustained tailwind for growth in the company’s strongest segment.”

The analyst report noted that "much of the recent selloff in shares has been due to concerns in the company’s energy segment, despite the fact that it accounts for roughly 15 percent of revenue and less than 1 percent of EBIT—this really has been the tail that wags the dog."

“The steep decline in oil prices is a concern, but the company indicated they have not yet seen any drop-off in volume as a result. At current levels, most established oilfield operations remain profitable,” according to Larkin.

The $15 price target was based on 14.0x the 2016 EPS estimate of $1.07.

Quality Distribution, Inc. recently traded at $12.09, up 7.95 percent.