Investment Analysts’ Downgrades for January, 23rd (CCC, COG, E, EC, FMS, GES, HPE, IR, ITGR, ITT)
Calgon Carbon (NYSE:CCC) was downgraded by analysts at Zacks Investment Research from a hold rating to a sell rating. According to Zacks, “Earnings estimate of Calgon Carbon for the fourth quarter has been declining of late. Calgon Carbon's industrial end-markets remain sluggish. The company is seeing weak demand for activated carbon in specific markets. It is also exposed to weakness in its equipment business. The company’s stretched valuation is another concern.”
Cabot Oil & Gas (NYSE:COG) was downgraded by analysts at Zacks Investment Research from a strong-buy rating to a hold rating. According to Zacks, “Cabot's large acreage holdings in the fast-growing Marcellus Shale and the Eagle Ford Shale supports several years of drilling. We believe COG’s execution success, continued expense management and improving well economics will further enhance its outlook. A relatively low risk profile and longer reserve lives are other positives. Overall, Cabot’s diversified asset portfolio should help it generate steady production growth going forward. However, being a natural gas-weighted company, Cabot continues to reel under the effects of the commodity's price struggles as reflected by its failure to beat estimates in 9 of the last 10 quarters. As it is, delays in the development of the Constitution pipeline keep us worried. Considering these factors, we see limited upside from current levels that forms the basis of our cautious stance.”
Ecopetrol (NYSE:EC) was downgraded by analysts at HSBC Holdings plc from a hold rating to a reduce rating.
Fresenius Medical Care AG & Co. (NYSE:FMS) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “Fresenius has had a favorable run on the bourse over the last year. A solid full-year guidance instills our confidence on the stock. We believe this is in tune with the ‘Growth Strategy 2020’, under which it aims to boost revenues to $28 billion by 2020, corresponding to an average annual growth rate of around 10%. A wide range of dialysis products, initiatives to gain market traction, strengthened international foothold, strategic acquisitions and divestments act as major catalysts. On the flipside, lackluster performance by the renal pharmaceutical segment is likely to dent Latin-American revenues in the coming quarters. Having a strong international foothold, Fresenius faces the brunt of stringent regulations in almost every country in which it operates. Thus, it has to fulfill specific legal requirements that include tough antitrust laws. Regulatory hurdles and competition in the niche markets are major headwinds.”
Guess? (NYSE:GES) was downgraded by analysts at Zacks Investment Research from a hold rating to a sell rating. According to Zacks, “Guess? has been facing a tough retail environment in the Americas, due to lower consumer spending. As a result, the company has resorted to store closures in these regions to focus on other prospective areas. Also, the company remains exposed to the unfavorable currency fluctuations. Nevertheless, shares of Guess? have outperformed the industry in a year's time-frame, courtesy of a solid surprise history. The third quarter of fiscal 2018 marked the company’s third-consecutive earnings beat. During the quarter the company’s performance mainly gained from continued strength in European and Asia business segments. The regions have been depicting robust growth backed by store openings, positive comps and wholesale growth. Driven by such upsides, management raised fiscal 2018 earnings view. Further, management is optimistic about e-commerce business that has been improving steadily.”
Hewlett Packard Enterprise (NYSE:HPE) was downgraded by analysts at Morgan Stanley from an overweight rating to an equal rating.
Ingersoll-Rand PLC (Ireland) (NYSE:IR) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “Ingersoll is focusing on improving the efficiencies and capabilities of products and services within its core businesses to improve profitability and reiterated its earlier bullish guidance on favorable growth dynamics. The geographic and industrial diversity coupled with a large installed product base provides ample growth opportunities within service, spare parts and replacement revenue streams. Furthermore, a robust operating platform and an efficient management team will likely drive net asset value and dividend growth in future. However, Ingersoll has underperformed the industry in the last three months. Operating risks from high R&D costs for technology-driven products are expected to weigh on margins and impair its long-term growth to some extent. Brexit could further result in higher tariff and non-tariff barriers to trade between the U.K. and the European Union, lowering productivity of the company.”
Integer (NYSE:ITGR) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “Over the last year Integer Holdings outperformed the broader industry in terms of price performance. The company has provided a positive guidance for full-year 2017. The company’s steadfast focus on customer relationship, spotlight on cost reduction, and burgeoning financial performance are the key catalysts in our view. Integer Holdings derives a significant portion of its revenues from Medicare’s service reimbursement programs. On the flipside, the company expects rental revenue per patient to decline in the future quarters owing to lower reimbursement rates in connection with the nationalization of competitive bidding and continued reimbursement declines. Revenue headwinds remain a concern, thanks to private insurance rate reductions, higher provisions for rental revenue adjustments, and lower net patient additions.”
ITT (NYSE:ITT) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “ITT Inc. has a robust earnings surprise history, having beaten estimates all through in the trailing four quarters. Also, the company’s current year estimates have moved north over the past couple of months. The company has been enjoying broad-based strength in transportation and chemical markets, and benefits from the Axtone buyout. The company raised both its earnings and revenue guidance for 2017, on the back of order growth and operational momentum. Consequently, ITT’s shares have surpassed the industry average over the past year. However, lower mining activity levels restricted growth at Industrial Process segment. Also, weaker upstream and midstream project activity hurt performance in the oil and gas market. Going forward, softness in aerospace and defense market, restrained client spending and higher commodity costs might restrict the company’s growth meaningfully.”
Illinois Tool Works (NYSE:ITW) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “In the last three months, Illinois Tool Works' shares have outperformed the industry. We believe that the company is well positioned to benefit from its solid product portfolio, strengthening foothold in various end markets and strategic initiatives to improve margins. From 2018 to 2022, the company expects organic revenue growth to be in the 3-5% range, operating margin to be in excess of 25% and earnings per share to grow 8-10% in each year. For 2018, the company anticipates GAAP earnings to be within $7.05-$7.25 per share, organic revenue growth to be 3-4% and operating margin to be 25-25.5%. The projections for 2017 have been reaffirmed, with earnings per share still anticipated to be $6.62-$6.72. However, the company is exposed to headwinds including unfavorable foreign currency movements, industry rivalry, volatilities in input price & supply and economic uncertainties.”
Navigant Consulting (NYSE:NCI) was downgraded by analysts at Zacks Investment Research from a hold rating to a sell rating. According to Zacks, “Navigant continues to face challenges on both the domestic and international fronts. This is primarily attributable to the difficulties in managing and staffing foreign operations, relatively limited new assignments, currency fluctuations and regulatory stringencies due to the uncertainty in the global economy. The consulting industry has low barriers to entry and it’s easier for consultants to start their own businesses. While hiring and retention of personnel are keys to driving revenues, full-time equivalent levels and related consultant compensation in excess of demand drive additional costs and can negatively impact the company’s margins. However, Navigant has outperformed the industry on an average in the last three months. By utilizing its strong cash flow generation capacity, Navigant continues to return capital to its shareholders and make investments in technology, new capabilities and client channels.”
Palo Alto Networks (NYSE:PANW) was downgraded by analysts at Zacks Investment Research from a strong-buy rating to a hold rating. According to Zacks, “Palo Alto Networks offers network security solutions to enterprises, service providers and government entities worldwide. Of late, estimates have remained stable for the company. We remain encouraged by Palo Alto Network’s healthy demand environment, new product launches and increasing adoption of its next-generation security platforms. Revenue growth seems to be steady, aided by strength across all its geographical regions and business segments. Also, customer wins coupled with expansion of the existing customer base are the other positives. We believe that synergies from acquisitions will also boost revenues, going forward. Also, the strategic partnerships with the likes of VMware, Splunk and Citrix, will continue to bring in customers for Palo Alto thereby boosting the top line. Nonetheless, a volatile spending environment and competition from peers remain concerns. The company has underperformed the industry over the past year.”
Petroleo Brasileiro SA Petrobras (NYSE:PBR) was downgraded by analysts at HSBC Holdings plc from a buy rating to a hold rating.
Pinnacle West Capital (NYSE:PNW) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “In last one year, shares of Pinnacle West Capital Corporation have performed at par with its industry. Pinnacle West Capital is well positioned to gain from the ongoing economic improvement in its service territories. Better economic prospects, increase in the customer count and higher customer spending are expected to drive earnings. The company is also expanding its renewable generation portfolio. However, Pinnacle West Capital is subject to comprehensive regulations by federal, state and local regulatory agencies. In addition, its operations are subject to fluctuations in commodity price, as well as operational risks and hazards. “
Scientific Games (NASDAQ:SGMS) was downgraded by analysts at Zacks Investment Research from a hold rating to a sell rating. According to Zacks, “Scientific Games faces intense competition in most of its operating markets. The presence of a large number of competitors in its core market significantly reduces its ability to demand higher renewal rates, thereby hurting its profitability. The company is dependent on renewal of long-term contracts, so the loss of a single contract, either to a competitor, or for any other reason would have a significant impact on revenue. Besides, leveraged balance sheet that results in signficant interest expense is an overhang on margins. Additionally, unfavorable foreign exchange is a major headwind. The company has mixed record of earnings surprises in recent quarters.”
Schlumberger (NYSE:SLB) was downgraded by analysts at Zacks Investment Research from a hold rating to a sell rating. According to Zacks, “Schlumberger has lower exposure to U.S. shale plays — where more drillers have gathered following partial recovery in crude prices. Per a report by Baker Hughes, a GE company, almost 271 more oil and gas rigs were added for exploiting prospective domestic resources in 2017. Hence, reduced exposure to U.S. plays may lessen oilfield service contracts for Schlumberger. Despite strong fourth-quarter 2017 results, the company’s pricing chart is not impressive. In the past year, Schlumberger has lost 5.4%, underperforming Halliburton’s 2.9% gain. We are also concerned about the increase in the company’s long-term debt load. Since 2014-end, there has been almost a 41% increase in long-term debt. Over the same time frame, cash balance fell considerably, reflecting weakness in the balance sheet.”
Syndax Pharmaceuticals (NASDAQ:SNDX) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “Syndax Pharmaceuticals, Inc. is a biopharmaceutical company which focused on the development and commercialization of entinostat, an epigenetic therapy for treatment-resistant cancers. The Company’s product pipeline includes ENCORE 601, ENCORE 602, J1353, NCI-7870, NCI-9844, E2112, NCI-8871 and NCI-9253 which are in clinical trial stage. Syndax Pharmaceuticals, Inc. is based in WALTHAM, United States. “
Sorl Auto Parts (NASDAQ:SORL) was downgraded by analysts at Zacks Investment Research from a strong-buy rating to a hold rating. According to Zacks, “Sorl Auto Parts specializes in the development, production and distribution of air brake valves and hydraulic brake valves. It is headquartered in the Ruian District of Wenzhou City, China’s automotive manufacturing center. SORL sells its products to forty-two vehicle manufacturers, including all of the truck manufacturers in China. SORL’s customer base consists of original equipment manufacturers, aftermarket distributors, and international customers. “
Sociedad Quimica y Minera de Chile (NYSE:SQM) was downgraded by analysts at Zacks Investment Research from a hold rating to a sell rating. According to Zacks, “Sociedad Quimica Minera Chile SA produces fertilizer and iodine and manufactures industrial chemicals and iodine derivative products. The Company sells its products in over 60 countries throughout the world. “
Stanley Black & Decker (NYSE:SWK) was downgraded by analysts at Zacks Investment Research from a hold rating to a sell rating. According to Zacks, “Over the last three months, shares of Stanley Black & Decker underperformed the industry it belongs to. In the near term, the company is exposed to headwinds like increasing cost of sales and operating expenses. In the third quarter, the company's cost of sales increased 13.8% year over year while selling, general and administrative expenses grew by 17.1%. Rising debt level is another concerning factor. Also, active competition in all businesses can prove detrimental to its profitability.”
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