Zacks Investment Research downgraded Chart Industries Inc. (GTLS) to a Zacks Rank #5 (Strong Sell) on Apr 8, 2014. Going by the Zacks model, companies holding a Zacks Rank #5 have strong chances of performing worse than the broader market.
Why the Downgrade?
Nothing much has changed for Chart Industries, as the company is still struggling to reach its pre-earnings (fourth-quarter 2013) closing share price of $90.04. On Feb 25, 2014, the company released its fourth-quarter 2013 results that failed to impress its shareholders as well as dampened market sentiments. Since then, its share price has fallen 18.5%, while the company has yielded a negative year-to-date return of 3%.
Lackluster results also triggered downward revisions in earnings estimates. In the last 60 days, all the 11 brokerage firms covering the stock lowered their earnings estimates for 2014; while out of 10 firms, 8 decreased their estimates for 2015. The Zacks Consensus Estimate is at $3.26 and $4.20 for 2014 and 2015, reflecting a decline of 13.8% and 13.2% respectively.
Lowered earnings estimates along with a negative 13.5% average earnings surprise have made us dubious about Chart Industries’ performance in the coming quarters. Hence, investors seeking exposure to metal fabrication companies are recommended to either avoid investing in or to dispose off their existing holdings in Chart Industries.
Other Stocks to Consider
Chart Industries is a $2.2 billion company. Some better-ranked stocks in the same industry include Kadant Inc. (KAI), Middleby Corp. (MIDD) and DXP Enterprises, Inc. (DXPE). While Kadant and Middleby hold a Zacks Rank #1 (Strong Buy), DXP Enterprises carries a Zacks Rank #2 (Buy).
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