Equities Research Analysts’ Downgrades for January, 22nd (ABBV, APH, BECN, CACI, CNAT, DOV, DTE, HMY, HP, LUN)

Equities Research Analysts’ downgrades for Monday, January 22nd:

AbbVie (NYSE:ABBV) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “AbbVie’s key drug Humira has been performing well based on strong demand trends for the drug, despite new competition. Moreover, Imbruvica has multibillion dollar potential and AbbVie is exploring the possibility of label expansion into solid tumors and autoimmune diseases. AbbVie’s shares outperformed the industry in the past one year supported by a series of positive news including promising data from several pivotal studies, regulatory approvals in the U.S., Europe, and Japan for its competitive HCV medicine Mavyret and FDA approval for the sixth indication for Imbrivica and settlement of its Humira patent disputes with Amgen. Also, several pivotal data readouts and regulatory milestones are expected in 2018. However, HCV sales continue to be hurt by intensifying competition. Estimates have gone up slightly ahead of the Q4 earnings release. AbbVie has a positive record of earnings surprises in the recent quarters.”

Amphenol (NYSE:APH) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “Amphenol is benefiting from improved end-market demand in automotive, mobile networks and military markets. A balanced organic and inorganic growth model, a lean and flexible cost structure, and an agile and entrepreneurial management team remain positives. Management raised its earlier guidance and has bullish revenue and earnings expectations for 2017. Amphenol has also outperformed the industry in the last three months. However, Amphenol is susceptible to volatility in foreign exchanges, which undermines its growth potential to some extent. Bulk of the company’s revenues comes from sales to the communications industry, demand for which is subject to rapid technological change. Furthermore, increasing cost of raw materials is also a matter of concern and is likely to be an additional drag on its profitability. Stiff competition from other players in the market remains another significant headwind for the company.”

Beacon Roofing Supply (NASDAQ:BECN) was downgraded by analysts at Zacks Investment Research from a strong-buy rating to a hold rating. According to Zacks, “Beacon Roofing's acquisition of Allied Building Products will catapult it to one of the largest public wholesale building materials distributors in the United States and Canada. The buyout will not only expand product offerings, but also increase geographical reach in both existing and new markets while ensuring significant cost synergies. However, Beacon Roofing has funded the Allied Building Products acquisition by taking up debt. Beacon Roofing is witnessing strong sales growth within the three product lines and across almost all geographies. The momentum is expected to continue in fiscal 2018. Beacon Roofing is also expected to benefit from the rebuilding activity triggered by the two back-to-back hurricanes. The company is also striving to improve margins by managing costs. However, competitive pricing pressure, higher operating costs remain headwinds.”

CACI International (NYSE:CACI) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “CACI International intends to drive operational excellence by intensively focusing on its organic and inorganic growth strategy and strengthening its existing customer relationships while building newer ones. Cyber attacks are creating increased awareness, leading to more demand for cyber solutions. CACI International also remains focused on its strategy to grow in larger markets and leverage mergers and acquisitions to further increase its market share. In addition, the company anticipates to significantly benefit from its cost-reduction program. However, macroeconomic challenges, foreign currency volatility and regulatory pressure remain potential headwinds for CACI International. In addition, the company has to continuously invest in value drivers that act as a hedge against competition. These increase its operating costs and reduce its profitability. The company has underperformed the industry in the last three months.”

Conatus Pharmaceuticals (NASDAQ:CNAT) was downgraded by analysts at Zacks Investment Research from a hold rating to a sell rating. According to Zacks, “Conatus is conducting several phase IIb studies on its lead candidate emricasan, targeting different types of NASH patient populations. Though Conatus is progressing well with emricasan, it is still several years away from entering the market. Any development/regulatory setback of emricasan could hamper Conatus’ prospects. Notably, several companies are working on developing treatments for NASH, which might make the market competitive for emricasan. The stock has underperformed the industry in the last one year. However, the market for NASH holds huge untapped potential. Also, Conatus’ agreement with Novartis for emricasan is a big positive as it not only lends expertise to the company, but also provides it with funds to develop emricasan. Estimates have been stable lately ahead of the company’s Q4 earnings release. The company has negative record of earnings surprises in recent quarters.”

Dover (NYSE:DOV) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “Dover’s third-quarter ended with robust bookings and backlog that bodes well for the fourth quarter. Dover guides 2017 adjusted EPS in the $4.23-$4.33 range, an increase of 38% year over year at the mid-point. The company’s separation of its Wellsite business and the sale of consumer and industrial winch business of Warn will help in streamlining portfolio. It will aid the company to invest in market-leading platforms with strong margin profiles. Dover will benefit from cost saving actions, significant drilling activity and fast-growing digital textile printing market. Dover recently acquired Ettlinger Kunststoffmaschinen GmbH and its affiliated entities, in a bid to boost its presence in the plastics and polymers processing equipment industry. The stock has outperformed its industry over the past six months. However, continued softness in the commercial cooking equipment markets and increased raw material costs will impact results.”

DTE Energy (NYSE:DTE) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “In last one year DTE Energy’s share price outperformed the broader industry’s rally. The company's focus on improving its cost structure and making capital investments in renewable generation, utility infrastructure and environmental compliance assets is impressive. It is also investing steadily to enhance its renewable generation assets. Currently, DTE Energy plans to invest $6.5 billion over the next 10 years for maintaining and upgrading the reliability of its electric utility systems. However, increasingly stringent government regulations for curbing emissions and operational risks remain major concerns. Unfavorable weather conditions also tend to have adversely impacted demand for utility services, which in turn might have acted as a headwind and lowered its income and cash flow to some extent.”

Harmony Gold Mining (NYSE:HMY) was downgraded by analysts at Zacks Investment Research from a hold rating to a sell rating. According to Zacks, “Harmony has underperformed the industry it belongs to over a year. The company remains exposed to issues such as mine shut downs and labor strikes. Also, the company’s high cost structure is another concern.”

Helmerich & Payne (NYSE:HP) was downgraded by analysts at Zacks Investment Research from a hold rating to a sell rating. According to Zacks, “With crude prices oscillating between $45 and $50 a barrel for most of 2017 – down 55% from mid-2014 levels – the top energy companies cut spending (particularly on the costly drilling projects) on the back of lower profit margins. This, in turn, meant less work for the beleaguered drillers (like Helmerich & Payne) as exploration for new oil and gas projects almost came to a standstill. Moreover, with large, multinational energy firms looking to reign in their skyrocketing capital expenses, the drilling space witnessed intense competition, as multiple firms chased a single contract. This excess capacity, in turn, led to significantly lower utilization/dayrates.  As such we do not see any near-term improvement for the likes of Helmerich & Payne. In fact, the stock is a risky bet that is best avoided at the moment.”

Lundin Mining (TSE:LUN) was downgraded by analysts at CIBC from an outperform rating to a neutral rating.

Lundin Mining (TSE:LUN) was downgraded by analysts at Handelsbanken from an accumulate rating to a reduce rating.

3M (NYSE:MMM) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “3M's global footprint, diversified product portfolio and the ability to penetrate in different markets have been its forte. Portfolio management, investment in innovation and business transformation are the three key levers on which the company intends to focus. 3M also intends to continue investing in capital expenditures and R&D to support organic growth as it aims a prudent capital structure strategy and increased capital deployment. 3M has outperformed the industry in the past three months. However, high pension expenses continue to be a drag on the company’s bottom line. Adverse foreign currency translations are likely to affect the company’s ability to realize projected growth rates in its sales and earnings. Also, as exports are a significant part of the company’s operations and growth prospects, sustained strength in U.S. dollar will continue to negatively impact the company’s earnings in the short-term.”

NuStar Energy (NYSE:NS) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “NuStar has successfully weathered crude's historic decline through its large and diverse asset portfolio that provides highly certain cash flows. Other positive attributes include its investment grade rating and strong track record for distribution growth. NuStar’s fee-based transportation and storage assets make it less susceptible to commodity price weakness. Further, the partnership acquired Dallas-based private pipeline company, Navigator Energy Services, which marks the partnership’s entry into the Permian Basin and is likely to boost its revenue. However, we believe that MLP valuations will be largely disconnected from business fundamentals as long as the hoopla over crude prices continues. We are also concerned about the partnership’s high leverage. As such, we see NuStar units performing in line with the broader market.”

Pfizer (NYSE:PFE) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “Pfizer has strengthened its product portfolio through acquisitions and licensing deals. However, Pfizer continues to face headwinds in the form of genericization of key drugs, supply challenges in the legacy Hospira portfolio, pricing pressure and rising competition, which are hurting the top line. Additionally, Pfizer’s shares have underperformed the industry in the past one year. Nonetheless, we believe that new products like Ibrance, contribution from acquisitions, cost-cutting efforts and share buybacks should help the company achieve its guidance. Pfizer also boasts a strong pipeline and expects approximately 25 to 30 drug approvals over the next five years, including around 15 products that have blockbuster potential. Pfizer’s growing immuno-oncology portfolio offers a strong potential. Pfizer has a mixed record of earnings surprises in recent quarters. Estimates have gone up slightly ahead of its Q4 earnings release.”

Rogers Communications (NYSE:RCI) (TSE:RCI.B) was downgraded by analysts at Zacks Investment Research from a hold rating to a sell rating. According to Zacks, “Rogers Communications operates in an intensely competitive wireless and cable TV industry. The company’s media segment continues to remain affected by continued softness in the advertising market. Like other cable companies, Rogers also suffers from video subscriber loss due to cord-cutting. On the other hand, Rogers Communications' wireless and cable segment has been doing well with huge wireless and high-speed internet subscriber gain. We are bullish about the company’s wireless growth from the roll out of lower block spectrum and offering of Internet of Things as a service to business enterprises. Over the past one year, the stock price grew 24.5% beating the industry's gain of 10.5%. The company has maintained its position as the largest integrated-telecom operator in Canada.”

Stone Energy (NYSE:SGY) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “Stone Energy has a multi-year inventory of drilling prospects, and is working on a strategy to fund its growth areas in Appalachia, the Rockies and the Deep Gas in the conventional shelf. It is actively engaged in horizontal well drilling in the Marcellus Shale and involved in various vertical tests in the Bakken Shale play. The company’s excellent financial health is also noteworthy. Stone Energy’s merger with Talos Energy is likely to create a leading exploration and production firm with extensive operations in offshore resources. However, over the past year Stone Energy plunged 17.2%, underperforming the industry’s 10.7% decline. Moreover, we are concerned about Stone Energy’s declining proved crude and natural gas reserves.”

Superior Industries International (NYSE:SUP) was downgraded by analysts at Zacks Investment Research from a hold rating to a sell rating. According to Zacks, “Superior Industries is undertaking different strategies to reduce costs and enhance its global competitive position. The company is also investing in new manufacturing processes in order to manufacture products with better finishes. Moreover, the acquisition of UNIWHEELS will enable the company to expand its global reach, diversify customer base and expand their technological capabilities. However, its shares have underperformed the industry it belongs to in the last three months. Rising capital expenditure, operating inefficiencies and changing energy prices are few of its concerns. Moreover, a large part of Superior Industries business is conducted in Mexico and Europe, which exposes the company to currency fluctuations.”

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