Credit Suisse Upgrades Mercer International (MERC) to Outperform

Credit Suisse upgraded Mercer International (NASDAQ: MERC) from Neutral to Outperform with a price target of $15.00 (from $14.00).

Analyst A. M. Kuske commented, "Mercer International reported US$61.1m of Q3 2015 EBITDA that easily beat our US$50.2m estimate and the Street's US$55.1m view (US$48.6m-US$63.0m range). Reported EPS of US$0.37 exceeded our US$0.19 view and the Street's US$0.298 figure. Against our numbers, favourable FX was the main reason behind the beat that contributed to lower operating costs (nearly US$10m on our estimates). We continue to believe MERC faces the currency tug-of-war impacting pricing and costs. Realized prices declined since Q1'14 from US$723 to US$632 per ADMT in the most recent quarter and Q2'15 at US$657. As expected with the strong financial results, MERC continued the dividend for the second consecutive quarter. In addition, MERC completed their NAFTA case and expects an H2 2016 ruling. Valuation: We upgrade our rating to Outperform from the prior Neutral and boost our target to US$15 from US$14. The target price is based on a NAV of US$14.96 that is obtained from a 5.5x EBITDA multiple on the core pulp business; 8.5x EBITDA multiple on the forecast renewable energy cash flows in 2016e; and, 35% of the NAFTA claim amount and 2016 dividend."

For an analyst ratings summary and ratings history on Mercer International click here. For more ratings news on Mercer International click here.

Shares of Mercer International closed at $10.80 yesterday.

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