On Dec 27, we reiterated our Neutral recommendation on
) largely due to its modest first quarter performance. We prefer
to remain on the sidelines until we see substantial organic
growth and improvement in the overall industry environment.
Why a Neutral Recommendation?
On Nov 26, Pall reported first quarter fiscal 2014 pro forma
earnings of 70 cents a share, marginally above the Zacks
Consensus Estimate of 69 cents. Earnings for the quarter also
beat the prior-year quarter's earnings of 68 cents a share by
2.9%. Macroeconomic headwinds during the quarter were fully
offset by an improved operational execution and favorable impact
from stringent cost-cutting actions.
On Dec 23, Pall signed an agreement to acquire the ATMI
LifeSciences to further strengthen its Life Sciences business.
This segment is one of the primary contributors to its top-line
growth with a 7% year-over-year revenue increase in the last
reported quarter. The acquisition supplements and broadens its
already-extensive portfolio of advanced solutions for
In fiscal 2014, Pall is expected to benefit from recovering
economic conditions and its strategic initiatives including
increased investments in R&D and innovation. In addition, the
company has also taken some cost reduction initiatives with a
focus on the Industrial segment to improve its
In the long run, Pall is also likely to benefit from several
secular trends, such as global infrastructure growth, increasing
demand for water filtration systems and steady growth in the
medical and pharmaceutical markets.
However, the company's geographically diversified business
exposes it significantly to the fluctuations in foreign
currencies. In addition, the company is highly exposed to the
risks of various external operational hazards including change in
political or economic conditions. For the last two quarters, the
company's business is getting affected by the depreciating
Moreover, Pall's revenues declined year over year in its
Industrial segment's business, thereby providing a limited
visibility into the future. Thus, we prefer to remain on the
sidelines and maintain our Neutral recommendation on Pall.
Other Stocks to Consider
Pall has a Zacks Rank #3 (Hold). Investors interested in the
pollution control industry may consider stocks like
Fuel Tech Inc.
Tetra Tech Inc.
), both carrying a Zacks Rank #1 (Strong Buy), and
Donaldson Company, Inc.
), carrying a Zacks Rank #2 (Buy).
DONALDSON CO (DCI): Free Stock Analysis
FUEL TECH INC (FTEK): Free Stock Analysis
PALL CORP (PLL): Free Stock Analysis Report
TETRA TECH NEW (TTEK): Free Stock Analysis
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