Why US Ecology, Inc. Shares Soared

Is this meaningful or just another movement?

Feb 14, 2014 at 2:30PM

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of US Ecology, Inc. (NASDAQ:ECOL) are trading 12% higher this afternoon after Credit Suisse initiated its coverage on the stock with a buy rating. The recommendation comes a day after the company's fourth-quarter earnings release caused a brief plunge in share prices.

So what: Credit Suisse placed a $39 price target on US Ecology's shares -- which now represents just a 5% upside after today's pop -- is one of several recent varied analyst moves. Morningstar analysts called the company's shares "fairly valued" after its earnings release, which implies that they're probably a bit overvalued today. KeyCorp placed a hold rating on shares late last month, when shares were trading for roughly the same price they are today. Zacks analysts gave the stock a sell rating a week earlier -- also at roughly the same price. There seems to be little consensus on the true value of US Ecology today.

Now what: There's probably a reason why US Ecology's shares dropped after its earnings release. The company's guidance for 2014 now anticipates adjusted earnings of between $1.50 and $1.60 per share for the full year, which at the high end is lower than 2013's full-year adjusted EPS by 12%. With no earnings growth on the horizon, and with shares already trading near Credit Suisse's new price target, there seems to be little reason for investors to chase this stock's gains today.

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