Zacks Investment Research downgraded Sun Hydraulics Corp. SNHY to a Zacks Rank #5 (Strong Sell) on Jun 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?
Sun Hydraulics Corporation reported lackluster results for first-quarter 2015 on May 4, leading to a 1.5% fall in its share price since then. Also, resentment over results was expressed through downward revisions in earnings estimates for the stock. A brief snapshot of the quarterly results will justify investors’ disappointment.
The company’s earnings of 39 cents per share came in below the Zacks Consensus Estimate of 41 cents, while decreasing 9% from the year-ago tally of 43 cents. Net sales were down 4.3% year over year due to a 9% fall in both European and Asian sales, partially offset by 1% gain in North America. Also, adverse impact of foreign currency movements lowered revenues by $1.5 million. Gross margin declined 310 basis points (bps) year over year to 39.3%.
Sun Hydraulics anticipates difficult operating conditions to persist in second-quarter 2015. Revenues are predicted at $54 million, down 12% year over year and 2% sequentially; while earnings are expected within 34−36 cents per share, lower than 46 cents earned in the year-ago quarter. Unfavorable foreign currency movements will likely impact revenues by $2.4 million and earnings by 6 cents per share.
Over the last 60 days, the Zacks Consensus Estimate for Sun Hydraulics Corporation has fell 17.6% to $1.40 per share for 2015 and 13.2% to $1.65 for 2016.
Stocks to Consider
Sun Hydraulics Corporation currently has a market capitalization of $1 billion. Better-ranked stocks in the machinery industry include EnPro Industries, Inc. NPO, The Middleby Corp. MIDD and Omnitek Engineering Corp. OMTK, each carrying a Zacks Rank #2 (Buy).
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