New York, NY, May 15, 2006--Interface Inc., shares rallied on Monday, after brokerage Raymond James upgraded its rating on the company, calling a recent sell-off of its shares unjustified.
Shares of Interface rose $1.13, or 9.5 percent, to $13 on the Nasdaq, where the stock was among the top percentage gainers in the afternoon session.
"We upgrade Interface to 'Strong Buy' from 'Outperform' following a recent slide in the shares, which we believe is overdone," Raymond James analysts wrote in a client note.
Interface shares have dropped about 25 percent since early May and 10 percent over the past week, in connection with an increase in crude oil prices. The cost of Interface's main raw material, nylon, is closely tied to energy prices. Shares also fell on Interface's first-quarter results, which missed Wall Street's forecasts, the brokerage said.
Despite the run-up in prices for Interface's raw materials, the analysts wrote "we do not believe there is any near-term risk in further input cost inflation."
Prices of benzene, a main ingredient in nylon, have not risen significantly, and few if any producers have been talking to Interface about raising prices, the analysts added.
Raymond James attributed the company's recent earnings miss to stock options expense, combined with higher marketing costs.
In late April, Interface reported first-quarter net income, excluding goodwill impairment and restructuring charges, of $5.7 million, or 11 cents per share, versus analysts' consensus view of 12 cents per share as measured by a Thomson Financial poll. In the year-ago period, Interface reported income from continuing operations of $2.9 million, or 6 cents per share.
"First-quarter demand trends strengthened as the quarter progressed, and April trends were robust, giving us more confidence that the second quarter will be a 'different story' than the first quarter," Raymond James said.
Interface shares hit a 52-week high of $15.70 in April and are up 58 percent so far this year.