Zacks Investment Research downgraded Daqo New Energy Corp. DQ to a Zacks Rank #5 (Strong Sell) on Apr 15, 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?
Daqo New Energy Corporation’s lower-than-expected results for fourth-quarter 2014 have weakened sentiments for the stock. Earnings of 39 cents per American Depository Shares (“ADS”) in the quarter lagged the Zacks Consensus Estimate of 52 cents by 25%.
Year-over-year revenue growth of 33.6% was partially offset by increase in cost of sales and selling, general and administrative expenses. Polysilicon shipments fell 3.8% sequentially, while cost of polysilicon production per kilogram edged up 1.4%. Moreover, the company’s cash and cash equivalents dropped 44% sequentially.
For first-quarter 2015, Daqo New Energy Corporation anticipates to ship approximately 1,500 MT of polysilicon, lower than 1,537 MT shipped in fourth-quarter 2014.
Following the earnings release on Apr 10, 2015, earnings estimates on Daqo New Energy Corporation were decreased. Over the last 7 days, the Consensus Estimate on the stock has declined 25.4% to $4.14 for 2015 and 30.3% to $5.83 for 2016. Also, the company has Earnings ESP of -27.5% for 2015 and -29.9% for 2016.
Stocks to Consider
Daqo New Energy Corporation currently has a market capitalization of $269 million. Better-ranked stocks in the chemical-specialty industry include KMG Chemicals Inc. KMG, OM Group Inc. OMG and BioAmber Inc. BIOA. While both KMG Chemicals and OM Group sport a Zacks Rank #1 (Strong Buy), BioAmber carries a Zacks Rank #2 (Buy).
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