Back to top

Analyst Blog

Zacks Investment Research downgraded Gibraltar Industries Inc. (ROCK - Analyst Report) to a Zacks Rank #5 (Strong Sell) on Jun 5.

Why the Downgrade?

Gibraltar has witnessed sharp downward estimate revisions after reporting disappointing first quarter 2013 results. On May 2, the company reported first quarter results with earnings per share of 4 cents, down 55.6% compared with 9 cents in the year-ago quarter. It also missed the Zacks Consensus Estimate of 12 cents by 66.7%. The decrease in earnings was due to worse than expected seasonal variations, lower prices as well as customers’ inventory control.

Acquisitions undertaken by Gibraltar helped increase revenues by 2.4% year over year to $196.8 million. However, revenue generation lagged the Zacks Consensus Estimate of $199.0 million by 1.1%.

In the first quarter, sales from North America were down 4.6%, while those from Europe slid 18.7%, led by lower pricing, soft demand and a highly competitive market. It is expected that the industrial weakness experienced by Gibraltar in the first quarter of 2013 will continue through the third quarter.

Gibraltar is exposed to customer concentration risks as well, deriving a large portion of its sales from only a handful of customers. Moreover, the company does not have long-term contracts with its customers, which may lead to termination of purchase causing severe loss to the business.

The Zacks Consensus Estimate for 2013 decreased 17.8% to 88 cents per share over the last 60 days. For 2014, the downward estimate revision pressure reduced the Zacks Consensus Estimate by 12.8% to $1.23 per share, over the same timeframe.

Other Stocks to Consider

The following steel producers with favorable Zacks Rank are worth considering.

Shiloh Industries Inc. carries a Zacks Rank #1 (Strong Buy)  

Kobe Steel Ltd. (KBSTY) carries a Zacks Rank #1 (Strong Buy)

L.B. Foster Co. (FSTR - Analyst Report) carries a Zacks Rank #2 (Buy).

Please login to Zacks.com or register to post a comment.