J.P. Morgan Comments On "Below Expectations" 4QF11 For UTi Worldwide

According to J.P. Morgan, UTi Worldwide's UTIW 4QF11 EPS was slightly below expectations driven by financial IT costs that were $2.6M in the quarter, and are expected to be an additonal $8-10M in F2012 without a clearly defined cost offset. J.P. Morgan reported that compensation cost was 55.3% of upside net revenue (up 80 basis points y/y and 160 basis points above our forecast) as UTIW's processes remain too manual; and as of now visibility to meaningful productivity gains is limited. “We think the decelerating y/y air volume growth and declining ocean volumes highlight risk of slowing EPS for UTIW. We are maintaining our December 2011 price target of $20. To derive our price target we continue to apply an 18x P/E multiple to our unchanged F2013 earnings estimate of $1.12/share. UTIW has historically traded in a very broad forward P/E range of 10x – 30x. We view the average range of the past three years (10x - 20x) as being more relevant given the company's transition from a strong acquisition driven grower to a potential turnaround story with much slower growth.” UTi Worldwide closed yesterday at $19.50.