Lumber Liquidators Holdings Inc (NYSE:LL) CDC Revision is a Moot Point

Shares of Lumber Liquidators Holdings Inc (NYSE:LL) are getting pounded in early trade this morning, and it is due to a revised CDC report that suggests that the report they issued two weeks ago was slightly flawed and their revision suggests that cancer risk in some of the Lumber Liquidators flooring could be three times higher than previously thought.

  • The previous range was 2 to 9 per 100,000
  • The revised range is 6 to 30 per 100,000

I have contacted the CDC to try to get a standard on what is low risk and thus far they have not been able to give me a formal standard.

However, CDC has said that their recommendations will not change.  Their numbers clearly did change, the reason had to do with the ceiling height measurement that they're using, but the recommendation made by the CDC has not changed.

Running a raw calculation, we can see that the high end of the revised range is still 0.03%, still reasonably low, and although the CDC has not disclosed what their threshold for being low is it is certainly clear that statistically the high end of the revised range is still low.

Although more news could surface on this, my gut reaction is that this was not grounds for the stock to fall 23%.  In fact, this might be a moot point because both ranges are low.  One was very low, and the revision is still low.

Our ratings on Lumber Liquidators stand and the stock is back in the range in which we were recommending it.

It is embarrassing for the CDC to be caught in a mistake, but 60 Minutes seems to have a vested interest, or at least the people close to the program do, and that's a good thing.  It helps us prevent errors from happening in the future, so hopefully they won't. 

Shareholders don't appreciate learning that a trusted source has made an error, even one that has no impact on their recommendations, because it can impact the stock, at least for a short time.