On Mar 17, 2015, Zacks Investment Research downgraded Ladder Capital Corp. LADR by a notch to a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
Ladder Capital has been experiencing downward estimate revisions based on sluggish fourth-quarter 2014 results reported on Mar 5. Higher debt-position and operating expenses, along with weak cash flow also overshadowed the dividend initiation news flow.
Additionally, the company has delivered negative earnings surprises in three out of the four quarters of 2014, with an average miss of 14.5%. Ladder Capital reported fourth-quarter operating earnings per share of 32 cents, which fell short ofthe Zacks Consensus Estimate by 27.6% and the year-ago figure by 76.5%.
Additionally, this commercial real estate financer underperformed the S&P 500 index, which generated a one-year growth of 13% against a negative 1% return clocked by the company.
Going forward, the Zacks Consensus Estimate for 2015 and 2016 moved south by 2% and 4.2% to $1.99 and $2.06 per share, respectively, in the last 30 days. There were no upward estimate revisions for either year over the same duration, further implying a feeble outlook.
The company’s persistently weak performance in 2014 discourages from being optimistic about the upcoming quarters. A 43.3% increase in expenses amid a 21.7% fall in other income more than offset the 52.2% ascent in net interest income in 2014. Subsequently, a dwindling bottom line suppressed operating cash flows by 56.2%.
Significant losses on derivatives further amplify financial risks. Overall, weak fundamental growth prospects amid significant investment risks have made investors jittery.
Insurers That Warrant a Look
While we prefer to avoid Ladder Capital for the time being, one could consider its better-ranked peers like Apollo Residential Mortgage Inc. AMTG, General Finance Corp. GFN and Blackhawk Network Holdings Inc. HAWK. All these stocks carry a Zacks Rank #2 (Buy).
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