Zacks Investment Research downgraded The Gorman-Rupp Company (GRC) to a Zacks Rank #5 (Strong Sell) on Feb 10, 2015. Going by the Zacks model, companies holding a Zacks Rank #5 have strong chances of performing worse than the broader market.
Why the Downgrade?
Gorman-Rupp’s earnings track record is disappointing, with negative earnings surprise in three out of four trailing quarters. In the recently reported fourth-quarter 2014 results, the company’s earnings of 30 cents per share lagged the Zacks Consensus Estimate of 32 cents by 6.3%. Revenue growth of 14.6% was partially offset by a 14% increase in costs of sales and 3.8% hike in selling, general and administrative (SG&A) expenses.
For 2015, Gorman-Rupp anticipates headwinds from foreign currency translation as well as reduced business from certain oil and gas end-markets.
Market sentiments have been weak for Gorman-Rupp since its earnings release on Feb 6. While the company’s share price has fallen by 6.4%, its earnings estimates have been revised downward. Over the last 7 days, the Zacks Consensus Estimate for the stock has decreased 6.5% to $1.58 for 2015, reflecting year-over-year growth of 13.7%. Also, the company currently has an average earnings surprise of -1.78%.
Other Stocks to Consider
Gorman-Rupp currently has a market capitalization of $754 million. Some better-ranked stocks in the industry include II-VI Inc. (IIVI), Kadant Inc. (KAI) and The Middleby Corp. (MIDD). While II-VI sports a Zacks Rank #1 (Strong Buy), both Kadant and Middleby Corporation carry a Zacks Rank #2 (Buy).
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