On Dec 26, 2014, Zacks Investment Research downgraded fertilizer maker Worthington Industries, Inc. (WOR) to a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
Share prices of Worthington Industries have moved south since the company reported its second-quarter fiscal 2015 results on Dec 17, 2014. The company’s adjusted earnings per share were 55 cents that missed the Zacks Consensus Estimate of 68 cents.
Earnings per share were affected negatively by declining steel prices, poor demand in agriculture and increased tax rates. Moreover, Worthington Industries did not achieve its earnings growth guidance for the second quarter of fiscal 2015.
Though overall earnings in the reported quarter were disappointing for the company, it witnessed strong revenue growth. Net sales for the second quarter (ended Nov 30, 2014) were $871.0 million, up 13% from the prior-year quarter which had recorded net sales of $769.9 million. Sales growth of the company came on the back of higher volume in Steel Processing and the impact of recent acquisitions in Pressure Cylinders.
Higher volumes in the reported quarter were more than offset by higher manufacturing expenses in all three business units, combined with the unfavorable impact of inventory holding losses in Steel Processing. The company is also facing challenges in the agriculture markets. Region-wise the company saw flat business in Europe while it was significantly up in both North America and Asia.
However, Worthington Industries is hopeful and sees growth opportunities in the automotive sector. The company expects its steel processing segment to continue performing well.
The Zacks Consensus Estimate for fiscal 2015 decreased 14.2% to $2.41 per share, following 4 downward estimate revisions over the last 30 days. Worthington Industries has also delivered negative earnings surprises in two of the last four quarters with an average negative surprise of 3.2%.
Other Stocks to Consider
Better-ranked companies in the broader industrial products sector worth considering include Alamo Group, Inc. (ALG), Century Aluminum Co. (CENX) and Horsehead Holding Corp. (ZINC). While Alamo Group sports a Zacks Rank #1 (Strong Buy), Century Aluminum and Horsehead Holding carry a Zacks Rank #2 (Buy).
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