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Liquidity Services falls ahead of earnings on Benchmark PT cut

  • Benchmark's Daniel Kurnos is reiterating a Buy on Liquidity Services (LQDT -5.7%) ahead of tomorrow morning's FQ4 report, but has lowered his PT to $33 from $40, and has also cut his 2014 EBITDA estimate to $99M from $124M.
  • Kurnos observes uncertainty regarding Liquidity's ability to hold onto the DoD's surplus asset sale contract has pressured shares. He thinks Liquidity will "most likely" retail the DoD's surplus contract, as well as its scrap asset contract, but is also concerned about the earnings impact of a more competitive bidding process.
  • At the same time, Kurnos points out his revised estimates still leave Liquidity trading at 8x EV/EBITDA, which he considers "an unwarranted discount" relative to an e-commerce peer multiple of 10x.
  • Liquidity is close to its 52-week low of $26.10. Shares were clocked last month by a two-notch BofA/Merrill downgrade.
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