On Jun 19, Zacks Investment Research downgraded
Layne Christensen Co.
) to a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
Layne Christensen's shares have been on a downtrend since the
company reported dismal first-quarter 2015 results on Jun 16. Since
then its shares have plummeted around 13.6% to close at $12.87 on
Jun 18. Further, the company had delivered negative earnings
surprises in all of the last four quarters with an average miss of
Layne Christensen had reported a net loss of $27.7 million or
$1.41 per share, substantially missing the Zacks Consensus Estimate
of a loss of 35 cents by 302.9%. In the prior-year quarter, the
company had reported a net loss of $23.8 million or $1.24 per
share. Revenues had also declined 15.5% year over year to $191.2
million while falling short of the Zacks Consensus Estimate of
The company's business was impacted by dismal performance of the
Heavy Civil and Mineral Services, which completely offset the
growth in Inliner, Geoconstruction and Energy Services. The Water
Resources business also delivered a weaker-than-expected
performance in the quarter.
Moreover, Layne Christensen's weak cash and balance sheet
position does not facilitate enough flexibility to make innovative
investments and strategic acquisitions. The company ended the
quarter with cash and equivalents of $21.2 million, down from $35.0
million as on Jan 31, 2014. It's total long-term debt widened to
$147.9 million compared with $108.3 million in the last
The company is taking initiatives to reduce its operating
expenses by $12 - $20 million per year. It is also taking measures
to minimize its exposure to under-performing businesses. However,
it is a matter to time to see if these steps bear fruit.
Other Stocks to Consider
Investors interested in this sector could also consider
better-ranked stocks including
AO Smith Corp.
Quanta Services, Inc.
). All of these carry a Zacks Rank #2 (Buy).
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