ScanSource shares jump as analyst boosts rating

The stock rose $3.54, or 12.3 percent, to $32.24 in morning trading. Over the past 52 weeks, the shares have traded between $22.61 and $39.50, and are off 11 percent since the start of the year.

Robert W. Baird & Co. analyst Reik Read upgraded the Greenville, S.C., company to "Outperform" from "Neutral" and raised his price target to $34 from $30.

The new target implies he expects shares to rise about 19 percent over Friday's $28.70 close.

Last month, ScanSource posted fiscal third-quarter profit of 42 cents per share, while analysts polled by Thomson Financial expected, on average, earnings of 48 cents per share.

Yet Read said issues that led to the miss are "temporary" and that "the stock now adequately accounts for those issues."

Despite broad economic weakness, opportunity in the domestic bar code sector still exists, as well as in the mobile computing sector, he said.

Internationally, ScanSource should continue to be a "strong opportunity," he said. ScanSource generates less than 25 percent of its sales from international clients, yet vendors that use its products collect about 40 percent of their revenue internationally, he said.

"The specialty technology niche allows ScanSource to offer value-added services that protect against price and margin pressure typically seen from distributors who offer commodity products," Read said in a note to clients.

Read boosted his 2008 earnings estimate to $2.03 per share from $2.02 per share. Analysts expect earnings of $2.06 per share.