Thaws Cool FRZ Stock

An update has just come out today on Reddy Ice Holdings, Inc. (FRZ - Analyst Report), in which senior consumer products analyst Steven Ralston, CFA is restating his Hold rating on the company. We excerpted the following details:

"Management is growing the company through an aggressive acquisition strategy. However, the company's high debt-service costs and highly seasonal earnings are concerns. The non-ice business was especially disappointing, resulting in management divesting it in September 2007.

"Management has thrice lowered full-year guidance based on adverse weather conditions. Despite a $31.25 cash buyout offer on the table, the Hold rating is maintained due to the company's inability to secure another potential buyer and the possibility of a negotiated lower buyout price, since the buyers extended the Marketing Period to January 31, 2008.

"The stock has only a 28-month trading history. In addition, the company has a very short and extremely seasonal public earnings history, most of which the stock traded at a negative P/E. Therefore, the stock is better valued on a P/S (Price-to-Sales) basis. The stock has traded in a P/S range of 1.26 to 2.03, with the high-end achieved in the most recent months.

"The current price target of $26.50 assumes the renegotiation of a lower buyout offer due to the company's inability to garner any alternative proposals after contacting 47 potential buyers during the "go shop" period, the extension of the buyers' Marketing Period to January 31, 2008, and the company's poor earnings due to adverse weather."

Read the full analyst report on FRZ.