Zacks Investment Research downgraded DXP Enterprises, Inc. DXPE to a Zacks Rank #5 (Strong Sell) on Mar 7, 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?
DXP Enterprises’ earnings track record has been mixed in the trailing four quarters, with negative earnings surprises in two quarters and beats in two others. The average earnings surprise stands at a negative 8.12%. In the recently reported fourth-quarter 2014, the company’s adjusted earnings of 95 cents per share lagged the Zacks Consensus Estimate of $1.08 by 12%.
Cost of sales increased 25.8% year over year, partially offsetting the top-line improvement of 21.9%. Gross margin declined 230 basis points to 27.9% in the quarter. Selling, general and administrative expenses grew 21.8% year over year. Interest expenses more than doubled to $2.9 million from $1.4 million in the year-ago comparable quarter.
Lower-than-expected quarterly results as well as persistent challenges in the oil and gas drilling business have dampened investors’ sentiments for DXP Enterprises. Over the last 7 days, the Zacks Consensus Estimate has declined 10.6% to $3.39 per share for 2015. This estimate reflects a year-over-year decline of 11.36%.
Other Stocks to Consider
DXP Enterprises currently has a market capitalization of $692 million. Better-ranked stocks in the machinery industry include II-VI Incorporated IIVI, ESCO Technologies Inc. ESE and AO Smith Corp. AOS. All these stocks hold a Zacks Rank #2 (Buy).
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