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Steiner Leisure plunges on Celebrity contract non-renewal; Stifel defends

  • Steiner Leisure (STNR -14.8%) shares plunged in morning trading after the company disclosed that its agreement with Celebrity Cruises will not be renewed upon expiration at the end of the year.
  • Management expects the termination to reduce EPS by no greater than $0.24/share.
  • Stifel Nicolaus's Steven Wieczynski reiterated a Buy rating with a $68 PT with the view that the shares' decline is a buying opportunity. He notes that the market is pricing in additional contract losses even though the company does not have major contracts coming up for renewal in the near-term with the exception of Norwegian, which is set to expire at the end of 2014. At a 2014E PE of 15.2 as of yesterday's close, the worst-case scenario EPS hit would shave off $3.65 from shares vs. the current $8.57 drop.
  • Also allaying concern: the company has described its talks with Norwegian as constructive and has been diversifying its revenue, Wieczynski notes.
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