On Sep 26, Zacks Investment Research downgraded
Simpson Manufacturing Co., Inc.
) to a Zacks Rank #5 (Strong Sell).
CAESAR STONE SD (CSTE): Free Stock Analysis
LOWES COS (LOW): Free Stock Analysis Report
PGT INC (PGTI): Free Stock Analysis Report
SIMPSON MFG INC (SSD): Free Stock Analysis
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Why the Downgrade?
On Jul 25, Simpson Manufacturing reported second-quarter 2013
earnings of 38 cents per share, up 15% from the year-earlier
quarter. This leading manufacturer of wood construction products
has delivered negative earnings surprises in 5 out of the past 8
Though total revenue improved 8% to $196 million in the quarter,
sales were affected negatively by economic conditions in Europe,
reduced home center sales and lower selling prices in the United
States, Canada and Europe.
Net sales to home centers decreased partly as a result of the
Lowe's Companies Inc.
) as a customer in the second quarter of 2012. Lowe's had
accounted for $5.3 million in sales in the second quarter of
2012. For the full year 2012, it had an impact of $11 million. On
a trailing 12 months basis, management estimated the effect in
the range of $20 million to $23 million. The loss of Lowe's as a
customer is going to weigh on Simpson Manufacturing.
The building construction sector is one of the principal markets
for Simpson Manufacturing. In June, housing starts unexpectedly
fell to the lowest level in almost a year to 836,000 units.
Housing starts recovered somewhat to 8,83,000 units in July and
8,91000 in August. Though this is above the Jun 2013 figure, it
was below expectations and also below the peak of just over 1
million in Mar 2013.
Moreover, recent rise in mortgage rates has made builders
cautious about breaking ground on new projects. This puts a
question on the expected recovery in the housing sector, which
would have benefited Simpson Manufacturing. Furthermore, given
the continuing weak demand backdrop in Europe, results are
expected to be affected in the region.
Simpson Manufacturing witnessed sharp downward estimate revisions
after announcing its second quarter fiscal 2013 results. In the
past 60 days, the Zacks Consensus Estimate for fiscal 2013
decreased 6% to 99 cents a share, while that for fiscal 2014 went
down 7% over the last 30 days to $1.29.
Other Stocks to Consider
Not all stocks are performing as poorly as Simpson Manufacturing.
Building and machinery-construction stocks worth considering
CaesarStone Sdot-Yam Ltd.
) which hold a Zacks Rank #1 (Strong Buy).