Zacks Investment Research downgraded Altra Industrial Motion Corp. (AIMC) to a Zacks Rank #5 (Strong Sell) on Aug 13, 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?
Market sentiments have been weak for Altra Industrial Motion, especially after it posted lower-than-expected second-quarter results on Jul 24. Since then, the company’s share price has fallen by 11.5% while volumes traded have declined 60.2%.
Despite improved year-over-year results, Altra Industrial Motion’s adjusted earnings of 48 cents per share fell short of the Zacks Consensus Estimate of 49 cents. Revenues, excluding the impact of Svendborg acquisition, climbed 6.4%. Cost of sales rose 17.4% year over year while selling, general and administrative (SG&A) expenses increased 24.1%.
Even more disappointing was Altra Industrial Motion’s outlook for full-year 2014. The company foresees a negative impact from the supplier issues. Also, rising healthcare costs and dilutive effects of the convertible notes would adversely affect earnings. Considering these factors, management has lowered adjusted earnings per share to a range of $1.75 to $1.85 from the previous projection of $1.85 to $2.00. However, the revenue guidance was maintained in the range of $800.0 to $825.0 million.
Lackluster results and lowered outlook have triggered downward revision in earnings estimates for Altra Industrial Motion. Over the past 30 days, the Zacks Consensus Estimate has decreased 12% to 44 cents per share for the third quarter, 7.1% to $1.83 for 2014 and 4.7% to $2.21 for 2015.
Other Stocks to Consider
Altra Industrial Motion presently has a market capitalization of $998.5 million. Some better-ranked stocks in the industry include Blount International Inc. (BLT), Dover Corporation (DOV) and DXP Enterprises, Inc. (DXPE). While Blount International sports a Zacks Rank #1 (Strong Buy), both Dover Corporation and DXP Enterprises carry a Zacks Rank #2 (Buy).
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