On Monday, Jefferies adjusted its outlook on JELD-WEN (NYSE:JELD) Holding, Inc. (NYSE:JELD), reducing the price target from $20.00 to $16.00, while keeping a Hold rating on the stock. The firm noted that the recent sell-off in JELD-WEN's shares appeared excessive, despite the company's revised full-year EBITDA guidance and historical challenges with execution. Management is credited with handling controllable aspects of the business effectively.
JELD-WEN's EBITDA expectations were lowered primarily due to softer performance in renovation and remodeling (R&R), particularly within the retail channel where the company has significant exposure. The observed weaker seasonal demand and limited inventory restocking in retail were contributing factors. Additionally, the company anticipates a reduction in business following its exit from certain operations in North America windows, projecting savings of $10-11 million, though these are not expected to impact the bottom line until the fourth quarter of 2024. Meanwhile, the second quarter of 2024 is forecasted to incur costs of $10 million.
The firm also highlighted that JELD-WEN is experiencing a downturn in EBITDA margin by 150-200 basis points for the second quarter of 2024. The guidance for the remainder of the year suggests a heavier reliance on the latter half for improved financial performance. Despite these challenges, JELD-WEN has successfully completed over 300 cost reduction projects, with around 700 still active. This progress is seen as a positive indicator by management, who believe these initiatives could lead to a 100-150 basis point improvement in margin expansion during the second half of 2024.
InvestingPro Insights
As JELD-WEN Holding, Inc. (NYSE:JELD) navigates through its current financial landscape, real-time insights from InvestingPro provide a deeper understanding of the company’s position. With a market capitalization of $1.28 billion and a negative adjusted P/E ratio over the last twelve months as of Q1 2024, the company's financial health is under scrutiny. Notably, the revenue decline of 8.64% over the same period indicates headwinds in the company’s operations. Despite this, the InvestingPro Tips suggest that net income is expected to grow this year and that the stock is currently in oversold territory, hinting at potential undervaluation.
Relevant to the article’s discussion on cost savings and EBITDA guidance, JELD-WEN's strong free cash flow yield and the fact that liquid assets exceed short-term obligations provide some financial stability. This could be crucial for the company as it implements cost reduction projects and navigates through the anticipated reduction in business from exiting certain operations. For readers interested in an in-depth analysis, InvestingPro offers additional insights, including 8 more tips available at https://www.investing.com/pro/JELD. To access these insights, use the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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