Last week, 60 Minutes reported on high levels of formaldehyde found in tested samples of laminate flooring made in China and sold by Lumber Liquidators Holdings Inc (NYSE:LL)
After the story aired, the Consumer Products Safety Commission requested the results of the tests 60 Minutes commissioned on that flooring, which we provided. We have also been flooded with mail from viewers concerned about their own laminate floors.
The LL story re-ignited a big debate between bulls and bears over the company and its stock price. Some thought the issues were overblown, while others thought the issues were serious and could even bankrupt the company.
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In a research note from earlier this week, Goldman Sachs stated:
We cut our estimates and price target to reflect the likely fallout from poor publicity on LL’s business. We maintain our Buy rating for three reasons:
* The stock has corrected dramatically, down almost 50% from earnings last week, and risk/reward looks favorable, despite our assumption of some business disruption, given the color the company put out in its 8-K after the 60-Minutes piece.
* LL will speak to the Street on a March 12 conference call, with a week of preparation, and have an opportunity to answer its critics with ample preparation. We have no reason not to believe the company’s recent assertions in the face of poor headlines, and have not seen proof of danger to consumers. We believe sentiment is currently highly skeptical.
While we see significant marketing risk for LL, the assertions relating to product safety relate to Chinese-made laminate products, only a small portion of its mix.
The California Air Resources Board has updated information for consumers. Please find that information by following this link:http://www.arb.ca.gov/html/fact_sheets/composite_wood_flooring_faq.pdf
Anderson Cooper gives an update to the March 1, 2015, 60 Minutes report “Lumber Liquidators”