On Nov 26, Zacks Investment Research downgraded materials
) to a Zacks Rank #5 (Strong Sell).
ASAHI KASEI CP (AHKSY): Get Free Report
LANDEC CORP (LNDC): Free Stock Analysis
METHANEX CORP (MEOH): Free Stock Analysis
SCHULMAN(A) INC (SHLM): Free Stock Analysis
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Landec has lowered its net income guidance for fiscal 2014 due to
industry-wide severe shortages of produce that resulted in
higher-than-expected raw materials cost in its value-added
The main reason behind the industry-wide shortage of produce is
an unusual confluence of extraordinarily unfavorable weather
conditions along the East Coast, California and Mexico, the top
three growing areas for vegetables in North America.
Also, higher-than-expected costs are expected to lower gross
margin in the value-added vegetable business in the second
quarter of fiscal 2014 compared to the prior and year-ago
quarters. Landec further presumes shortages and quality issues to
continue into the third quarter.
Apio, Inc. the food business of Landec, has entered into annual
contracts with growers for produce which depends on fixed price
per delivered pound. It has also entered into contracts with its
customers which depend on a fixed price per unit. Landec will buy
produce on the open market at prices in excess of the contracted
prices from the growers so as to meet the customers' demand. Now,
as the sales prices to the customers are fixed, the excess amount
to be paid for produce above the contract at the times of
shortage will unfavorably impact Landec's earnings.
Landec now estimates its consolidated net income for fiscal 2014
to be flat to up 5% compared with the original guidance for net
income growth of roughly 20%, barring the $3.9 million earn out
adjustment in fiscal 2013. The company expects net income for the
second quarter to be 13 cents per share.
The Zacks Consensus Estimate for fiscal 2014 for Landec has gone
down roughly 15% to 73 cents per share since first-quarter fiscal
2014 earnings release. The Zacks Consensus Estimate for fiscal
2015 has also declined 6.6% to 98 cents per share.
Other Stocks to Consider
Other companies in the chemical industry worth considering
A. Schulman, Inc.
). While both Methanex and Asahi carry a Zacks Rank #1 (Strong
Buy), A. Schulman retains a Zacks Rank #2 (Buy).