Zacks Investment Research downgraded Innophos Holdings Inc (IPHS) to a Zacks Rank #5 (Strong Sell) on Dec 9, 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 since Innophos Holdings reported weaker-than-expected results for third-quarter 2014 on Oct 27. Share price has fallen nearly 5.7% while earnings estimates have been revised downward. A brief discussion on the quarter’s results is provided below:
Innophos Holdings’ earnings came in at 83 cents per share, roughly 7.8% below the Zacks Consensus Estimate of 90 cents. Revenues were down 5% year over year due primarily to a 4% decline in Specialty Phosphates sales and 14.6% fall in GTPS & Other sales. Operating margin was affected by a 14.5% increase in total operating expenses.
Considering the difficult operating conditions in the U.S. and supply shortage of Purified Phosphoric Acid (“PPA”), Innophos Holdings anticipates Specialty Phosphates revenues to decline in the range of 1−2% year over year. The company also estimates its operating margin to lie at the low-end of the previously issued forecast of 14−15%.
Disappointing results and weak outlook for 2014 have made investors dubious about Innophos Holdings’ growth prospects in the years ahead. Over the last 60 days, the Zacks Consensus Estimate for the company has decreased 9.9% to $3.00 for 2014 and by 14.7% to $3.30 for 2015.
Other Stocks to Consider
Innophos Holdings Inc currently has a $1.2 billion market capitalization. Some better-ranked stocks in the chemical industry include Innospec Inc. (IOSP), Valhi, Inc. (VHI) and Celanese Corporation (CE). While both Innospec and Valhi sport a Zacks Rank #1 (Strong Buy), Celanese Corporation carries a Zacks Rank #2 (Buy).
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