JP Morgan Raises Georgia Gulf (GGC) Rating To Overweight

JP Morgan analyst Jeffrey J. Zekauskas raised his rating for shares of Georgia Gulf Corp. (NYSE: GGC) from Neutral to Overweight, with a price target of $20.

According to Zekauskas, "our belief is that it is better to be a little too early in owning Georgia Gulf than a little too late. Georgia Gulf is a stock capable of moving much in advance of business fundamentals. Once it begins to become clear that the housing cycle is on firmer footing and that PVC margins are set to widen, the shares can move significantly. Its operating leverage to volume and price change is large, and it becomes difficult to calibrate changes in an improving environment. We believe that with no debt maturities before 2014 and trading at 5.6x 2011E EBITDA, which assumes a relatively small margin improvement, the company represents good value on a risk reward basis. Our Dec 2010 price target is $20, representing 6.2x estimated 2011 EBITDA."

Zekauskas noted that Georgia Gulf Corp. had refinanced its capital structure and that there were no financing pressures in the near term.

Zekauskas said that the $1.25 per share in free cash flow he expected the company to generate in 2010 was nearly 8% of the current stock price and that there were no foreseeable restructuring charges, pension expenses or working capital that were likely to negatively affect cash flow.