Zacks Investment Research downgraded Valhi, Inc. VHI to a Zacks Rank #5 (Strong Sell) on Dec 11, 2015. Going by the Zacks model, companies holding a Zacks Rank #5 have strong chances of underperforming the broader market in the near term.
Why the Downgrade?
Market sentiments have been weak for Valhi since the beginning of 2015, as evident from a negative year-to-date return of 75.4%. Also, the company’s third-quarter 2015 results failed to encourage investors regarding its prospects. The company recorded loss of 3 cents per share compared with the Zacks Consensus Estimate of 3 cents of earnings per share.
Valhi's top-line performance was dismal as revenues decreased 19.5% year over year led by sales decline in the Chemicals and Waste management segments as well as flat results in the Real estate management and development segment.
Disappointment over weak results triggered downward revision in earnings estimates for Valhi. Over the last 60 days, the Zacks Consensus Estimate for the stock has decreased to loss of 6 cents per share from earnings of 10 cents per share for 2015; while the same declined to loss of 4 cents per share from earnings of 25 cents per share for 2016. The estimate for the fourth quarter is currently pegged at a loss of 4 cents per share, down from earnings of 5 cents per share expected earlier.
Stocks to Consider
Valhi currently has a $522-million market capitalization. Better-ranked stocks in the chemical industry include Celanese Corporation CE, Innospec Inc. IOSP and The Dow Chemical Company DOW. While Celanese Corporation and Innospec sport a Zacks Rank #1 (Strong Buy), The Dow Chemical Company carries a Zacks Rank #2 (Buy).
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