Shares of Invacare Corp. tumbled Monday morning, after the home medical equipment company received a downgrade to "Hold" from "Buy" from Stifel Nicolaus analyst Eric Gommel.
Gommel said in a research note he downgraded the Elyria, Ohio, company based on valuation. He said he expects the company will show good execution next year, in part due to lower interest expense and help from a weak dollar compared to the euro.
"However, we also believe there is a lack of near-term catalysts to drive shares higher with longer-term headwinds from competitive bidding impacting Invacare's customers in 2011 and beyond, which could weigh on valuation, in our opinion," he said.
Invacare announced Friday it had amended a credit agreement to let the company use cash to pay down an additional $75 million in debt. Gommel said he raised earnings estimates for the company over the next two years based on the assumption that Invacare pays down debt by that amount over the next 12 to 18 months.
Stifel Nicolaus increased its 2010 earnings per share estimate to $1.84 from $1.81 and its 2011 estimate to $2 from $1.89.
Analysts surveyed by Thomson Reuters expect, on average, earnings per share of $1.69 for 2010.
Invacare shares fell 86 cents, or 3.28 percent, to $25.33 in late morning trading Monday. Meanwhile, the Standard & Poor's 500 index climbed about 1.5 percent.