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Associated Press
Ahead of the Bell: ExpressJet Downgraded
Associated Press 09.21.07, 9:25 AM ET
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NEW YORK -
An analyst cut his rating on regional carrier ExpressJet Holdings Inc. to "Sell" late Thursday and slashed his target price on concerns the company isn't worth the price shareholders are paying.
In a note titled "Even At This Price, Lowering Rating to Sell," Soleil Securities analyst James M. Higgins cautioned that expectations built into the current stock price "are highly optimistic." ExpressJet shares closed Thursday at $3.86.
The analyst downgraded the Houston-based airline from "Hold" and more than halved his target price, to $3 from $6.50 previously. In doing so, he warned the company is unlikely to generate enough revenue to meet its costs.
"We believe it unlikely that XJT can generate returns in its core segments to justify the value reflected in the shares today," he wrote in a note to investors.
Higgins, who is bullish on several other airline stocks, now forecasts a 2007 loss of 45 cents per share; he previously estimated a profit of 7 cents per share. For 2008, the analyst lowered his per-share estimate to 40 cents in profit, down from 70 cents previously.
"The best thing XJT has going for it is cash flow that should be slightly positive in 2008," he wrote. "But that cash is only worth what it can generate in income unless the company liquidates, and we believe the sum-of-the-parts value of XJT as a going concern is considerably below its market price," he added later.
ExpressJet operates a fleet of more than 200 regional jets, mostly under the Continental Express banner.
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