Zacks Investment Research downgraded Penford Corporation (PENX) to a Zacks Rank #5 (Strong Sell) on Feb 8, 2014.
Why the Downgrade?
Penford Corporation reported disappointing financial results for the fiscal first quarter of 2014 (ended Nov 30, 2013) on Jan 9, 2014. Since then the company’s share price has plunged 15%.
A brief snapshot of Penford’s financial results has been provided below.
Earnings per share in the quarter were 4 cents, way below 14 cents earned in the year-ago quarter. Sales declined by 7.4% primarily due to an 11% fall in the company’s Industrial Ingredients revenue, offset partially by a 3.6% increase in Food Ingredients revenue.
Despite the 6% decline in cost of sales, lower revenues pulled down gross profit by 19%. Gross margin in the quarter was 9.8%, down 140 basis points year over year while operating margin was 1.4%, down 190 basis points year over year.
Weak fiscal first quarter 2014 results as well as a negative average earnings surprise of 83.8% make us pessimistic of fiscal second quarter 2014 results. Also, in the last 30 days, the Zacks Consensus Estimate for Penford has decreased by 13.3% to 65 cents for fiscal 2014 (ending Aug 2014) and by 5% to 95 cents for fiscal 2015.
Other Stocks to Consider
Penford Corporation is a $139 million company operating in the specialty chemicals industry. Some better-ranked stocks in the industry include International Flavors & Fragrances Inc. (IFF), NewMarket Corp. (NEU) and Sensient Technologies Corp. (SXT). All these companies hold a Zacks Rank #2 (Buy).
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