Zacks Investment Research downgraded Mercer International Inc. MERC to a Zacks Rank #5 (Strong Sell) on Jun 25, 2016. Going by the Zacks model, companies carrying 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 Mercer International as evident from a 12.3% fall in the company’s share price year-to-date and a roughly 18% decline since the release of first-quarter 2016 results on Apr 28. The company’s earnings for the quarter of 14 cents per share lagged the Zacks Consensus Estimate of 18 cents by 22.2%.
For 2016, Mercer International expects to face some top-line headwinds including annual maintenance downtime for its Rosenthal, Stendal and Celgar mills. Moreover, the company expects seasonal maintenance downtime in Europe and weak inventories in China to put pressure on pulp prices in second-quarter 2016.
Disappointing first-quarter results as well as future outlook have made investors skeptical regarding Mercer International’s prospects. Over the last 60 days, the Zacks Consensus Estimate for the stock decreased 18.6% to 96 cents per share for 2016 and 6% to $1.87 for 2017. For second-quarter 2016, the estimate fell 37.5% to 10 cents.
Stocks to Consider
Mercer International Inc. currently has a market capitalization of approximately $499 million. Though the company is off the investors’ radar, there are some stocks in the paper & related products industry with higher investment values. They include Clearwater Paper Corporation CLW, Neenah Paper, Inc. NP and Orchids Paper Products Company TIS, each sporting a Zacks Rank #1 (Strong Buy).
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