Zacks Investment Research downgraded Potlatch Corporation PCH to a Zacks Rank #5 (Strong Sell) on Jun 30, 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?
Market sentiments have been weak for Potlatch Corporation since the beginning of 2015, with its share price down by 12.9% till date. Also, the company reported lower-than-expected results for first-quarter 2015. Average earnings surprise for the trailing four quarters is a negative 6.10%.
Earnings were 14 cents per share, roughly 26.3% below the Zacks Consensus Estimate of 19 cents and down compared with the year-ago tally of 50 cents. Revenues were down 3.9% year over year due to weakness in Real Estate business. Costs and expenses increased 10.9% over the year-ago quarter, and subsequently, operating margin dropped 1190 basis points. Also, Potlatch Corporation’s long-term debt stands at $602 million, which if left unchecked, will increase the company’s financial obligations.
Disappointment over lackluster results made investors wary regarding Potlatch Corporation’s growth prospects. Over the last 60 days, the Zacks Consensus Estimate for the stock has decreased 11% to $1.21 per share for 2015; while for 2016, it remained unchanged at $1.85 per share. The earnings estimate for second-quarter 2015 is pegged at 3 cents per share, down 93.8% year over year.
Stocks to Consider
Potlatch Corporation currently has a market capitalization of $1.5 billion. Better-ranked stocks in the building products industry include Energy Focus, Inc. EFOI, Rayonier Inc. RYN and The Home Depot, Inc. HD. While Energy Focus sports a Zacks Rank #1 (Strong Buy), both Rayonier and The Home Depot carry a Zacks Rank #2 (Buy).
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