Markets

Colfax Corporation Down to Strong Sell on Market Woes

Zacks Investment Research downgraded Colfax CorporationCFX to a Zacks Rank #5 (Strong Sell) on Oct 6, 2015. Going by the Zacks model, companies holding a Zacks Rank #5 have strong chances of underperforming the broader market.

Why the Downgrade?

Market sentiments for Colfax Corporation have been weak, with its share price down 42.5% year to date. Also, the company's second-quarter 2015 results failed to create the much-needed momentum among investors that led to a fall of roughly 28% in the share price since Jul 23.

We believe macroeconomic headwinds, including a weak global economic outlook and soft commodity prices, continue to cloud the near- to medium-term outlook of industrial machine manufacturers.

For Colfax, trade relations with emerging markets as well as oil & gas end markets are creating hurdles. Demand for equipment has experienced a steep fall as fluctuating currency movements and uncertain global growth negatively impacted export orders. To add to the woes, weak oil prices have restricted oil & gas drilling activities, thereby curtailing the capital expenditure for purchase of machinery and equipment. For 2015, the company does not expect any respite from the difficult operating conditions in its client countries.

Also, Colfax had a huge debt level, approximately $1.4 billion, at the end of second-quarter 2015. Such high leverage, if unchecked, will increase the company's financial obligations and subsequently lower its profitability.

Bleak prospects have weakened investors' confidence in Colfax Corporation. Over the last 60 days, the Zacks Consensus Estimate for the stock has decreased 2.6% to $1.85 per share for 2015 and 4.1% to $2.08 for 2016. Moreover, the company has Earnings ESP of -2.44% for the third quarter, -2.70% for 2015 and -8.17% for 2016.

Stocks to Consider

Colfax Corporation currently has a market capitalization of $3.7 billion. Better-ranked players in the machinery include Graco Inc. GGG , Graham Corporation GHM and Energous Corporation WATT . While Graco sports a Zacks Rank #1 (Strong Buy), both Graham Corporation and Energous Corporation carry a Zacks Rank #2 (Buy).

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GRACO INC (GGG): Free Stock Analysis Report

GRAHAM CORP (GHM): Free Stock Analysis Report

COLFAX CORP (CFX): Free Stock Analysis Report

ENERGOUS CORP (WATT): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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