Research Analysts’ Downgrades for September, 21st (ADS, CLZNY, DOV, ECA, ED, FCN, GLNCY, HBAN, HUM, IMBBY)
Alliance Data Systems Corp. (NYSE:ADS) was downgraded by analysts at Zacks Investment Research from a hold rating to a sell rating. According to Zacks, “Alliance Data’s margin contraction from increasing expenses and dependence on limited clients for revenues are concerns. Though adverse forex were a drag, the company does not expect any forex impact drag in the second half of 2016. Absence of any near term catalysts there were no earnings momentum over the last few weeks. Nonetheless, Alliance Data’s inorganic story seems impressive on strategic buyouts and is banking heavily on the Conversant buyout that has started reaping results. It intends to deploy capital on mergers and acquisitions as well as buybacks in 2016. It has been strengthening its balance sheet with financial flexibility to capitalize on strategic opportunities. The company expects top- and bottom-line growth to gain pace as the year advances with lower yield compression at Card Services, lower loss rates and better performance at Epsilon. All of these factors cushioned the company to raise its 2016 guidance.”
CLARIANT AG ADR EACH REPR 1 COM (OTC:CLZNY) was downgraded by analysts at Citigroup Inc. from a buy rating to a neutral rating.
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Dover Corp. (NYSE:DOV) was downgraded by analysts at Zacks Investment Research from a hold rating to a sell rating. According to Zacks, “Dover narrowed its 2016 earnings per share guidance range to $3.42–$3.52. It also expects full-year revenue to dip 3%–5%. The guidance cut came on the back of delay in project timing & persistent softness in oil & gas related markets. Dover’s bookings and backlog both declined in the second quarter. This does not augur well for the company’s third-quarter 2016 performance. Moreover, foreign exchange volatility, higher restructuring charges and lower order activity will hurt Dover’s third-quarter results. “
Encana Corp. (NYSE:ECA) was downgraded by analysts at Zacks Investment Research from a strong-buy rating to a hold rating. According to Zacks, “Encana has one of the largest natural gas resource portfolios in North America, providing a diverse and high quality inventory of reserves. We are impressed by the company’s cost reduction initiatives. Additionally, the steps undertaken by Encana to divest high-cost low-profit gas assets will increase its financial flexibility and fund the transition to a more diversified oil and gas firm. The sale of its Gordondale shale properties in Alberta is a case in point, which not only strengthened its balance sheet but also reduced its future spending commitments. However, ECA’s profit is influenced by commodity price fluctuations. With both oil and gas prices still remaining on the lower side, Encana's revenues, earnings and cash flows will be affected. Also, the recent equity offering – despite helping ECA to pay down debt and boost drilling – has significantly diluted existing shareholders' equity.”
Consolidated Edison (NYSE:ED) was downgraded by analysts at Zacks Investment Research from a hold rating to a sell rating. According to Zacks, “Consolidated Edison’s operations are subject to federal, state and local regulations, which means that any change these could interrupt the operations of its generating units, thereby affecting its financial performance. Disruption in wholesale energy markets could hurt the company’s ability to meet customer energy needs and thus weigh on its performance. Again, adverse decisions by the commissions in pending regulatory cases may negatively impact the company’s earnings. That said, Consolidated Edison has a history of favorable rate decisions by regulatory authorities, which will likely encourage it to invest more in infrastructure improvement. Moreover, the company follows a systematic capital investment plan for infrastructure development and reliability projects.”
FTI Consulting (NYSE:FCN) was downgraded by analysts at Zacks Investment Research from a hold rating to a sell rating. According to Zacks, “FTI Consulting is highly exposed to foreign exchange rate risks and pricing pressure due to the Brexit referendum, undermining its growth prospects to some extent. The company is likely to be stifled by the higher tariff and non-tariff barriers to trade between the U.K. and the European Union, lowering its productivity. Clients’ spending patterns also remain cautious, given the concerns over the current market environment, volatile financial markets and a lack of visibility regarding the impact of future tax and regulatory policies. The company has a positive earnings history in the trailing four quarters, beating estimates thrice. Earnings estimates have also remained steady in the last week. The company has planned significant investments to expand its Technology business, which are likely to boost its earnings going forward. Acquisitions in high-growth segments and strategic hires could also turn the company’s fortunes.”
Glencore PLC (OTCMKTS:GLNCY) was downgraded by analysts at Morgan Stanley from an equal weight rating to an underweight rating.
Huntington Bancshares (NASDAQ:HBAN) was downgraded by analysts at Zacks Investment Research from a hold rating to a sell rating. According to Zacks, “Huntington’s profitability growth remains challenged by several issues including escalating costs. Further, the low rate environment has taken a toll on the bank’s net interest margin (NIM) which will continue to remain under pressure if there is no rise in interest rates. Additionally, the stringent regulations across the finance sector limit the company’s growth opportunities. However, the company continues to benefit from growing loans and deposits balances. Notably, the acquisition of FirstMerit Corp. is expected to be accretive to Huntington’s earnings per share next year.”
Humana (NYSE:HUM) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “Humana thrives for long term growth on prudent inorganic growth, efficient capital deployment and business diversifications. Solid performance by Individual Medicare Advantage and Healthcare Services Business led Humana to raise its guidance. The Zacks Consensus Estimate has been witnessing upward revision since last 60 days leading to a 5% and 7.8% increase in 2016 and 2017 estimates respectively. Moreover, in three of the last four quarters, the company has recorded a positive earning surprise with an average beat of 1.32%. Nevertheless, the company faces increased competition, weakness in individual commercial business, increasing expenses, and softness in its group Medicare Advantage business. Moreover, the merger with Aetna has been objected by the U.S. Department of Justice. Hence, the deal that would have enhanced Humana’s market power now remains shrouded in uncertainty.”
Imperial Tobacco Group PLC (OTC:IMBBY) was downgraded by analysts at Credit Suisse Group AG from an outperform rating to a neutral rating.
Lockheed Martin Corp. (NYSE:LMT) was downgraded by analysts at Zacks Investment Research from a hold rating to a sell rating. According to Zacks, “The recent temporay grounding of 15 F-35A aircrafts of Lockheed Martin might have hampered the reputaton of this top-rated defense prime ; as is evident from the 1.8% fall witnessedin currrent quarter estimates provided by analysts for the company, in trailing 30 days. Moreover, the threat of sequestration still lurks over this defense major, as it draws a major portion of its revenues from the defense department. The weak backlog also remains a major concern. On a bright note, company's solid outlook, impressive revenue growth, and potential share buybacks are positives. Steady flow of contracts from the Pentagon reveals its inherent strength. Its growing international mix and new positive defense budget revisions will likely act as a major tailwind.”
Mast Therapeutics (NASDAQ:MSTX) was downgraded by analysts at Laidlaw to a neutral rating.
Mast Therapeutics (NASDAQ:MSTX) was downgraded by analysts at Maxim Group from a buy rating to a hold rating.
Maxim Integrated Products (NASDAQ:MXIM) was downgraded by analysts at Zacks Investment Research from a hold rating to a sell rating. According to Zacks, “Maxim is an OEM of analog and mixed signal ICs. The fiscal fourth-quarter earnings of the company were a penny above the Zacks Consensus Estimate. Maxim has a solid portfolio that generates steady design wins, a highly profitable and well-diversified core business, a policy of maintaining efficiency that has led to cost cutting measures and regular cash returns. However, its exposure to the consumer and communications markets increases risks. The concentration of its mobility revenues at Samsung further adds to the risks. This could, however, be mitigated once the diversification strategy takes off.”
People’s United Financial (NASDAQ:PBCT) was downgraded by analysts at Zacks Investment Research from a hold rating to a sell rating. According to Zacks, “People’s United’s revenue growth remains under pressure amid a challenging operating environment. Notably, management curtailed net interest income growth projection as well as margin guidance for 2016 assuming a persistent flat-yield curve scenario and absence of Fed rate hike this year. Also, despite cost-cutting initiatives, the company continues to record increased expenses which will likely hurt bottom-line growth. Additionally, stringent regulatory norms limit bank’s flexibility in business operations. However, we remain optimistic about the expansion moves of the company with latest deals to acquire Gerstein Fisher and Suffolk Bancorp, both of which are anticipated to be accretive to earnings. Also, sustained growth in loans and deposits highlights organic growth.”
Plexus Corp. (NASDAQ:PLXS) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “Plexus is expected to benefit from its new program wins especially in the Industrial/Commercial. For the current quarter, management expects revenues in the industrial & commercial sector to grow in high single digits range due to new program wins. Plexus is also seeing strength in its Defense/Security/Aerospace business. Plexus has won new programs in Americas and APAC regions though that in the EMEA region remained soft. Additionally, the consolidation of the company’s production facilities in low-cost areas is expected to boost margins, going forward. However, weakness in the Networking/Communications market and intense competition from peers remain a concern.”
Pool Corp. (NASDAQ:POOL) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “For Pool, the second quarter of 2016 marked the company’s 25th consecutive quarter of year-over-year growth in sales, gross profit and operating earnings. Notably, the company should continue to benefit in the near term from base business sales growth and favorable trends in the housing market. Continually strong growth in the pool renovation category along with reasonable improvement in green segment sales (the Horizon segment), is a major positive. The company’s leading market share position and opportunistic expansion strategies also position it well for revenue growth. Also, estimates have been mostly stable lately ahead of Pool’s third quarter earnings release. Moreover, the company has positive record of earnings surprises in recent quarters. However, seasonality of the company’s business and macroeconomic headwinds raise caution.”
Radian Group (NYSE:RDN) was downgraded by analysts at Zacks Investment Research from a hold rating to a sell rating. According to Zacks, “Stricter regulations, rising mortgage rates and a competitive market pose risks for Radian Group. Also, the Zacks Consensus Estimates for 2016 and 2017 have also witnessed downward revisions over the last 60 days. The same declined 3.8% and 3.9% for 2016 and 2017 respectively, over the same time frame. However, the company is poised for long-term growth on expansive mortgage and real estate service offerings, declining delinquency, lower levels of paid claims and improving risk-based capital ratio. Moreover, redemption of surplus note enhances its liquidity position by $325 million. Also, the new capital plan includes buying back up to $125 million worth redeeming the remaining $196 million face value of its 9.00% Senior Notes, due 2017. Its initiatives to solidify the financial position and improved debt maturity profile bode well.”
Universal Forest Products (NASDAQ:UFPI) was downgraded by analysts at Zacks Investment Research from a strong-buy rating to a hold rating. According to Zacks, “Universal Forest's long-term prospects appear bright, given the solid organic and inorganic expansion efforts. The company believes that acquisition of Idaho Western and certain assets of Robbins Manufacturing Co. will boost its revenue by $100 million annually. Also, the recently completed acquisition of idX Corp will add new product portfolio and customer base to the company's existing businesses. In addition, the company has certain long-term targets, including sales growth of roughly 4-6% above positive GDP growth. New product sales are anticipated to constitute at least 10% of total sales. Despite these positives, the company is exposed to near-term headwinds including adverse foreign currency movements, geopolitical issues, higher costs & expenses and stiff competition.”
Xcel Energy (NYSE:XEL) was downgraded by analysts at Zacks Investment Research from a hold rating to a sell rating. According to Zacks, “Xcel Energy's operation is subject to stringent environmental legislations which call for additional expenditures and can adversely impact the company's profits. Rising debt levels of Xcel Energy is a concern, with its debt/capital ratio presently higher than the industry average. Despite safety measures, nuclear units run the possibility of accidents and forced shutdown, and Xcel Energy’s nuclear generation assets are not immune to such risks. Annual estimates have been going down ahead of the company’s Q3 earnings release. However, long-term investment plans will strengthen its operations and help it to serve its expanding customer base in a more reliable and efficient manner. The company is also benefiting from improving economic conditions in its service territories. The company is focused on expanding its renewable generation assets and lowering its carbon footprint.”
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