Zacks Investment Research downgraded Potlatch Corporation PCH to a Zacks Rank #5 (Strong Sell) on Dec 10, 2015. Going by the Zacks model, companies holding a Zacks Rank #5 have strong chances of underperforming the broader market over the next few quarters.
Why the Downgrade?
Market sentiments have been weak for Potlatch Corporation since the beginning of 2015, as evident from a negative year-to-date return of 21.9%. The stock’s financial performance in the last four quarters was mixed. Last quarter, the company’s earnings of 53 cents per share came in line with the Zacks Consensus Estimate.
Potlatch Corporation’s top-line performance was weak as revenues decreased 1.5% year over year due to approximately 16.5% sales decline in the Wood Products segment. Revenue decline and increase of cost of sales adversely impacted the company’s margin profile. Also, the company’s high-debt levels, if left unchecked, might be a concerning factor.
Disappointing results have made investors skeptical about Potlatch Corporation’s prospects. Over the last 60 days, the Zacks Consensus Estimate for the stock has fallen 22.5% to 79 cents per share for 2015 and 19.1% to $1.23 for 2016. Also, the Zacks Consensus estimate for fourth-quarter 2015 declined 71.9% to 9 cents per share. In addition, the company has an Earnings ESP of -5.06% for 2015 and -33.33% for fourth-quarter 2015.
Stocks to Consider
Potlatch Corporation currently has a market capitalization of $1.3 billion. Better-ranked stocks in the building products industry include Universal Forest Products Inc. UFPI, Comfort Systems USA Inc. FIX and Energy Focus, Inc. EFOI. While Universal Forest Products sports a Zacks Rank #1 (Strong Buy), both Comfort Systems and Energy Focus carry a Zacks Rank #2 (Buy).
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