Dahlman Rose Initiates Buy Rating on Pinnacle Airlines (PNCL)

Dahlman Rose is out with a research report this morning, where it initiates a Buy rating on Pinnacle Airlines Corp. PNCL; it has an $8.00 price target on the stock. The Dahlman analysts said that the Memphis based company fits into their thesis that regional airlines will continue to consolidate until there are two or three providers. The analysts believe that a major reason for this consolidation is the current lack of revenue control by the regional airlines. The analysts added that, with the acquisition of Mesaba, Pinnacle now totals 34% of the total Delta Connection fleet; it is also the largest provider of regional jet feeds to mainline Delta Air Lines flights. The company is a perfect takeout candidate. As for valuation, the analysts remarked, “Pinnacle finished 2Q10 with $79 million of cash or $4.28 per share on the balance sheet and long term debt of $537 million. The company had equity of $112.1 million, or $6.08 per share. During July, Pinnacle added to its cash position and finished the month with $100 million, or $5.56 per share. The stock is trading near its cash position and below book value.”