Raymond James analysts commissioned tests on Lumber Liquidators' floors to see for themselves and what they found seems okay.
In early March, CBS' "60 Minutes" aired the results of tests on Lumber Liquidators' China-sourced flooring sold in the US. The tests found levels of formaldehyde that exceeded regulations set by the California Air Resources Board.
After the show aired, Lumber Liquidators said "60 Minutes" used an improper testing method to make its conclusions.
For its own test, Raymond James bought two flooring samples from Lumber Liquidators stores in Florida and sent them to labs for two kinds of tests: the disputed "deconstructive method," and a "Small Chamber test" that puts the finished product in pre-defined temperature and humidity conditions.
Here's what they found:
"In the tests Raymond James commissioned, the deconstructive method showed formaldehyde levels similar to the tests done by "60 Minutes," while test on the finished laminated flooring sealed in the emissions."
The firm added:
Our findings confirm what the company stated in its business update and that we had postulated:
- The finished product and laminating process seal in much of the formaldehyde emission; and
- That there was a reasonably high likelihood that the deconstructed MDF cores would exceed the CARB2 limits.
After the analysts' tests, they upgraded Lumber Liquidators to "Outperform" from "Market Perform," with a price target of $40.
The Consumer Product Safety Commission is investigating Lumber Liquidators, and has collected samples similar to what's already in people's homes for testing.
"While the formal results are still months away – and there is still risk that some, many, or all products may not pass – we think the odds favor a better result," Raymond James said.
Shares of Lumber Liquidators closed at $33.20 on Thursday, and rose by more than 3% in early trading Monday.
Year-to-date, shares are down nearly 50%.
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