Stock to Avoid: PH Glatfelter

Zacks

Zacks Investment Research downgraded PH Glatfelter Co. (GLT) to a Zacks Rank #5 (Strong Sell) on Apr 9, 2014. Going by the Zacks model, companies holding a Zacks Rank #5 have strong chances of underperforming the broader market.

Why the Downgrade?

PH Glatfelter’s fourth-quarter 2013 results failed to impress its shareholders and as such its share price fell nearly 7.2% on Feb 13. To date, the company has not been able to regain its momentum with its share price still down by 14.5% since the earnings release.

A snapshot of PH Glatfelter's results and outlook is provided below:

Adjusted earnings per share were 34 cents, lagging the Zacks Consensus Estimate of 56 cents. However, bottom-line results surpassed the year-ago earnings of 26 cents. Revenues in the quarter increased 1.1% year over year to $435 million on the back of healthy performances in the Composite Fibers and Advanced Airlaid Materials segments. However, the Specialty Papers segment reported weak results. Cost of sales increased 11.9%, while gross margins plummeted 90 basis points.

In the last 60 days, the Zacks Consensus Estimate for PH Glatfelter has decreased 14.2% to $1.87 for 2014 and by 5.0% to $2.47 for 2015. Lowered earnings estimates as well as a negative average earnings surprise of 1.7% have made us dubious about the company’s performance in the quarters ahead. Currently, the company has an Earnings ESP of -16.67% for first-quarter 2014 and -3.74% for full-year 2014.

Other Stocks to Consider

PH Glatfelter presently has a market capitalization of $1.15 billion. Other stocks to watch out for in the industry include Domtar Corporation (UFS), KapStone Paper and Packaging Corporation (KS) and Neenah Paper, Inc. (NP), all of which hold a Zacks Rank #1 (Strong Buy).

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