Zacks Investment Research downgraded Luxfer Holdings PLC LXFR to a Zacks Rank #5 (Strong Sell) on Mar 20, 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?
Luxfer Holdings’ earnings track record for the trailing four quarters has been disappointing, with negative earnings surprise in three quarters. Average earnings surprise is -12.15%. Moreover, the company’s share price has inched down 1.1% since the release of fourth-quarter 2014 results on Mar 11.
In the fourth quarter, Luxfer Holdings’ earnings of 32 cents per American Depositary Shares (“ADS”) came in 10.34% above the Zacks Consensus Estimate of 29 cents. However, the bottom line lagged the year-ago tally of 40 cents. Revenue growth of 6.4% was offset by a 10.8% increase in cost of sales. Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) margin declined 430 basis points to 12.8%.
For 2015, Luxfer Holdings anticipates tax rate to be 27%, above 24% in 2014. Also, with a high debt level of $107 million, exiting 2014, the company’s financial obligations are likely to increase. Dismal quarterly results and a soft outlook have made investors dubious about the company’s future performance.
Over the last 30 days, the Zacks Consensus Estimate for Luxfer Holdings has decreased 17% to $1.17 for 2015 and 6.7% to $1.40 for 2016. For first-quarter 2015, the Estimate has fallen 25.8% to 23 cents. Also, the company has an Earnings ESP of -5.13% for 2015.
Other Stocks to Consider
Luxfer Holdings currently has a market capitalization of $363 million. Some 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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