Zacks Investment Research downgraded Kraton Performance Polymers Inc. KRA to a Zacks Rank #5 (Strong Sell) on Dec 19, 2015. Going by the Zacks model, companies holding a Zacks Rank #5 have strong chances of underperforming the broader market over the next few quarters.
Why the Downgrade?
Market sentiments have been weak for Kraton Performance Polymers since the beginning of 2015, as evident from a negative year-to-date return of 11.6%. Also, the company’s third-quarter 2015 results failed to build the much-needed interest among investors. The company’s earnings of 48 cents per share lagged the Zacks Consensus Estimate of 68 cents by 29.4%.
Also, Kraton Performance Polymers’ top-line performance was weak as revenues decreased 15.7% year over year led by negative impact of foreign currency movements, lower average selling price and relatively flat volumes.
For 2015, Kraton Performance Polymers lowered its gross profit expectation to $900−$915 per ton from the previous estimate of $900−$925. Lackluster results and bleak prospects have made investors doubtful about the company’s future.
Over the last 60 days, the Zacks Consensus Estimate for Kraton Performance Polymers has fallen 8.1% to $1.71 per share for 2015 and 7.6% to $2.18 for 2016.
Stocks to Consider
Kraton Performance Polymers currently has a market capitalization of $561 million. Better-ranked stocks in the chemical industry include Rayonier Advanced Materials Inc. RYAM, Celanese Corporation CE and Innospec Inc. IOSP. While both Rayonier Advanced Materials and Celanese Corporation sport a Zacks Rank #1 (Strong Buy), Innospec carries a Zacks Rank #2 (Buy).
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