Estimates have been falling for
Orion Marine Group
) after the company reported an earnings miss on August 1. It is a
Zacks Rank #5 (Strong Sell) stock.
Despite the negative earnings momentum, shares of Orion Marine
still trade at a premium valuation. Investors may want to wait for
earnings momentum to turn around before establishing a long
Orion Marine Group, Inc. provides heavy civil marine construction
and specialty services in North America. The company relies heavily
on federal, state and municipal governments, which account for
approximately 42% of its revenue. It is headquartered in Houston,
Texas and has a market cap of $285 million.
Second Quarter Results
Orion Marine Group reported its second quarter results on August 1.
Earnings per share came in at $0.01, below the Zacks Consensus
Estimate of 3 cents. It was an improvement, however, from a loss of
$0.20 in the same quarter last year.
Revenue rose 25% to $84.1 million, which was in-line with
consensus. Gross profit improved to 9.3% of revenue, but this was
barely enough to cover its selling, general and administrative
Following the second quarter earnings miss, analysts revised their
estimates meaningfully lower for both 2013 and 2014. This sent the
stock to a Zacks Rank #5 (Strong Sell).
The Zacks Consensus Estimate for 2013 is now $0.11, down from $0.14
before the Q2 release. The 2014 consensus is currently $0.29, down
from $0.36 over the same period.
You can see the drop in consensus estimates in the following chart:
This is not just a company-specific phenomenon though. The
'Building - Heavy Construction' industry ranks 238th out of the 265
industries that Zacks ranks, placing it in the bottom 11% of all
industries. This indicates that earnings estimates are generally
falling throughout the industry.
Shares of Orion Marine are down more than -17% since the Q2
earnings release. Despite this, the stock doesn't look like a value
here. Shares currently trade around 41x 12-month forward earnings,
which is a premium to the industry median 14x. Its price to sales
ratio of 0.9 is also above the industry median of 0.6.
The Bottom Line
With falling earnings estimates and premium valuation, investors
should consider avoiding this Zacks Rank #5 (Strong Sell) stock
until its earnings momentum turns around.
Investors still interested in the 'Building - Heavy Construction'
industry may want to take a look at
), which both carry a Zacks Rank of 2 (Buy).
Todd Bunton is the Growth & Income Stock Strategist for
and Editor of the
Income Plus Investor service
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