Zacks Investment Research downgraded HB Fuller Co. FUL to a Zacks Rank #5 (Strong Sell) on Sep 29, 2015. Going by the Zacks model, companies holding a Zacks Rank #5 have strong chances of underperforming the broader market in the near term.
Why the Downgrade?
HB Fuller’s third-quarter fiscal 2015 results (ended Aug 2015) disappointed investors and the market at large, with its share price down by 5.3% since Sep 23. The company’s earnings of 61 cents per share came in below the Zacks Consensus Estimate of 69 cents.
Revenues edged down 0.5% year over year as 6.7% gain from higher volumes and prices were more than offset by 7.2% negative impact from foreign currency translations. HB Fuller’s businesses in the Americas were weak, with sales declining 7.9% year over year.
For fiscal 2015, HB Fuller lowered its revenue guidance to $2.075 billion from the earlier projection of $2.1 billion primarily due to weakness in the American businesses and higher tax rate. Adjusted earnings are anticipated at approximately $2.23 per share, down from the prior forecast of $2.45 per share.
Weak results and outlook have made investors dubious on HB Fuller’s growth prospects. Over the last 7 days, the Zacks Consensus Estimate for the stock has decreased 8.3% to $2.22 per share for fiscal 2015 and 7.7% to $2.75 for fiscal 2016; while the same for fourth quarter was down 14.8% to 69 cents. Also, the company has an Earnings ESP of -1.82% for fiscal 2016.
Stocks to Consider
HB Fuller currently has a $1.7-billion market capitalization. Better-ranked stocks in the chemical industry include Trinseo SA TSE, Air Products & Chemicals Inc. APD and Israel Chemicals Ltd. ICL. While Trinseo SA sports a Zacks Rank #1 (Strong Buy), both Air Products & Chemicals and Israel Chemicals carry a Zacks Rank #2 (Buy).
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