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Should You Dump Simpson Manufacturing (SSD) Stock Now?
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Simpson Manufacturing Co., Inc. (SSD - Free Report) has been disappointing investors of late given that the shares of this building construction products manufacturer and seller have yielded a negative return of 4.9% year to date. Should investors dump this stock from their portfolio? Let’s find out.
Estimates Moving South
Estimates for the company for second-quarter 2017, fiscal 2017 and fiscal 2018, have moved south in the past 30 days, reflecting the negative outlook of analysts. For the second quarter, estimate has dropped 10% to 55 cents per share in the past 60 days. For fiscal 2017, the estimate has dropped 4% to $1.91 per share and for fiscal 2018, the estimate has declined 4% to $2.13 per share.
Negative Earnings Surprise History
Simpson Manufacturing reported a negative surprise of 14.29% in the last reported quarter, missing the Zacks Consensus Estimate. In the trailing four quarters, the company posted an average negative earnings surprise of 1.40%.
Disappointing Q1, Guidance
Simpson Manufacturing’s first quarter earnings declined 12% on a year-over-year basis to 30 cents. Margins were affected by rising steel costs and recent acquisitions that were dilutive to margins. R&D, selling and G&A expenses were also higher in the quarter.
For 2017, the company anticipates gross margins will be in the range of 45–46%, slightly lower than our prior guidance due to lower gross margins from the acquisitions and impact of rise in raw materials in North America.
Price Performance
Simpson Manufacturing has underperformed the Zacks categorized Buildings & Construction Products – Miscellaneous subindustry with respect to price performance in the past one year. The stock has gained 6.2% while the industry increased 16.1%.
Unfavorable Zacks Rank, Score
Simpson Manufacturing currently carries a Zacks Rank #4 (Sell) and a VGM score of “D”. Here V stands for Value, G for Growth and M for Momentum. The score is a weighted combination of these three scores (Value - B, Growth - A, Momentum - B). Such a score allows you to eliminate the negative aspects of stocks and select winners.
Expensive Valuation
The company’s stretched valuation is a concern. In case of Simpson Manufacturing, the trailing twelve months price earnings (P/E) ratio is 22.68 while the Zacks categorized sub industry average trailing twelve months P/E ratio is pegged much lower at 17.42. This implies that the stock is overvalued and hence, we caution the investors against entering the stock at this point.
Boise Cascade has an average positive earnings surprise of 114.74% in the trailing four quarters. Its shares have gained 24.7% in the past one year. TopBuild delivered an average positive earnings surprise of 5.97% in the past four quarters and its shares clocked a 50.8% gain in the past one year. Potlatch Corporation has an average positive earnings surprise of 42.59%. Potlatch Corporation’s shares rose 37% in the last one year.
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Should You Dump Simpson Manufacturing (SSD) Stock Now?
Simpson Manufacturing Co., Inc. (SSD - Free Report) has been disappointing investors of late given that the shares of this building construction products manufacturer and seller have yielded a negative return of 4.9% year to date. Should investors dump this stock from their portfolio? Let’s find out.
Estimates Moving South
Estimates for the company for second-quarter 2017, fiscal 2017 and fiscal 2018, have moved south in the past 30 days, reflecting the negative outlook of analysts. For the second quarter, estimate has dropped 10% to 55 cents per share in the past 60 days. For fiscal 2017, the estimate has dropped 4% to $1.91 per share and for fiscal 2018, the estimate has declined 4% to $2.13 per share.
Negative Earnings Surprise History
Simpson Manufacturing reported a negative surprise of 14.29% in the last reported quarter, missing the Zacks Consensus Estimate. In the trailing four quarters, the company posted an average negative earnings surprise of 1.40%.
Disappointing Q1, Guidance
Simpson Manufacturing’s first quarter earnings declined 12% on a year-over-year basis to 30 cents. Margins were affected by rising steel costs and recent acquisitions that were dilutive to margins. R&D, selling and G&A expenses were also higher in the quarter.
For 2017, the company anticipates gross margins will be in the range of 45–46%, slightly lower than our prior guidance due to lower gross margins from the acquisitions and impact of rise in raw materials in North America.
Price Performance
Simpson Manufacturing has underperformed the Zacks categorized Buildings & Construction Products – Miscellaneous subindustry with respect to price performance in the past one year. The stock has gained 6.2% while the industry increased 16.1%.
Unfavorable Zacks Rank, Score
Simpson Manufacturing currently carries a Zacks Rank #4 (Sell) and a VGM score of “D”. Here V stands for Value, G for Growth and M for Momentum. The score is a weighted combination of these three scores (Value - B, Growth - A, Momentum - B). Such a score allows you to eliminate the negative aspects of stocks and select winners.
Expensive Valuation
The company’s stretched valuation is a concern. In case of Simpson Manufacturing, the trailing twelve months price earnings (P/E) ratio is 22.68 while the Zacks categorized sub industry average trailing twelve months P/E ratio is pegged much lower at 17.42. This implies that the stock is overvalued and hence, we caution the investors against entering the stock at this point.
Key Picks
Some better-ranked stocks worth considering in the same sector are Boise Cascade Company (BCC - Free Report) , TopBuild Corp. (BLD - Free Report) and Potlatch Corporation (PCH - Free Report) . All the three stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Boise Cascade has an average positive earnings surprise of 114.74% in the trailing four quarters. Its shares have gained 24.7% in the past one year. TopBuild delivered an average positive earnings surprise of 5.97% in the past four quarters and its shares clocked a 50.8% gain in the past one year. Potlatch Corporation has an average positive earnings surprise of 42.59%. Potlatch Corporation’s shares rose 37% in the last one year.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look. See the pot trades we're targeting>>