) recently posed a big negative earnings surprise and has seen
estimates drop significantly. The stock has a Zacks Rank #5 (Strong
Sell) and is today's Bear of the Day.
Recent Big Miss
On November 12, the company reported earnings of $0.14, which was
$0.34 below the Zacks Consensus Estimate. That translates to a -70%
earnings surprise. Investors, however, shrugged off the big miss
and sent the stock higher by 7% in the session following the
Rockwood Holdings develops specialty chemicals and advanced
materials for industrial and commercial applications. The company
operates in four segments: Specialty Chemicals, Performance
Additives, Titanium Dioxide Pigments, and Advanced Ceramics.
Rockwood Holdings was incorporated in 2000 and is based in
Princeton, New Jersey.
Estimates Moving Lower
Despite a stock prices that has moved higher for most of the year,
estimates have been dropping on all year. At the start of 2013, the
Zacks Consensus Estimate was calling for 2013 EPS of $3.86. That
was the high-water mark for the year.
By April, the estimate was down to $3.57 and the number tumbled to
$2.82 in August and is now down to $2.20.
The Zacks Consensus for next year isn't much better, although the
high-water mark came in March, when analysts were calling for $4.87
in EPS. By August it had dipped to $3.61 and is now $2.28. That
means analysts are now modeling in $0.08 of eps growth for next
year, and off a base of $2.20, you could imagine how low the
implied growth rate is.
ROC trades at a premium to the industry average in terms of both PE
multiples. The forward PE of 30.8x is well above the 16.6x industry
average, as is the 33x trailing PE compared to the 19x industry
average. The price to book shows a modest discount to the industry
average, but the price to sales multiple carries a premium to the
industry average. One reason for the stiff valuation could be the
40% net margin the ROC has compared to an 8% industry average...
that is quite an advantage.
The price and consensus chart paints an ugly picture for ROC.
Analysts have been taking their estimates down over the entire
year, and if you are a believer that earnings are a primary driver
of stocks, then this is a chart you don't want to miss.
Investors might want to look at another stock in the same sector
with a better Zacks Rank. One example of that is
) which is a Zacks Rank #1 (Strong Buy).
Brian Bolan is a Stock Strategist for Zacks.com. He is the Editor
in charge of the
Run Investor service
, a Buy and Hold service where he recommends the stocks in the
Brian is also the editor of
Breakout Growth Trader
a trading service that focuses on small cap stocks and also carries
a risk limiting strategy. Subscribers get daily emails along with
buy, and sell alerts.
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FERRO CORP (FOE): Free Stock Analysis Report
ROCKWOOD HLDGS (ROC): Free Stock Analysis
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