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Tale of the Tape

Zacks Equity Research

Should You Get Rid of Walter Energy (WLT) Now?
March 21, 2014


Trades from $3
Similar to wise buying decisions, exiting certain underperformers at the right time helps maximize portfolio returns. Selling off losers can be difficult, but if both the share price and estimates are falling, it could be time to get rid of the security before more losses hit your portfolio.

One such stock that you may want to consider dropping is Walter Energy, Inc. , which has witnessed a significant price decline in the past four weeks, and it has seen negative earnings estimate revisions for the current quarter and the current year. A Zacks Rank #4 (Sell) further confirms weakness in WLT.

A key reason for this move has been the negative trend in earnings estimate revisions. For the full year, we have seen 12 estimates moving down in the past 30 days, compared with no upward revision. This trend has caused the consensus estimate to trend lower, going from a loss of $2.52 a share a month ago to its current level of a loss $3.51.

Also, for the current quarter, Walter Energy has seen 4 downward estimate revisions versus no revisions in the opposite direction, dragging the consensus estimate down to a loss of $1.08 a share from a loss of 91 cents over the past 30 days.    
The stock also has seen some pretty dismal trading lately, as the share price has dropped 17.8% in the past month.

So it may not be a good decision to keep this stock in your portfolio anymore, at least if you don’t have a long time horizon to wait.

If you are still interested in the Energy Sector, you may instead consider better-ranked stocks like Canadian Solar Inc. (CSIQ - Analyst Report), Vermilion Energy Inc. (VET - Snapshot Report) and Warren Resources Inc. (WRES - Snapshot Report). All these stocks have a Zacks Rank #1 (Strong Buy).

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