The market is on fire right now. Tech names continue to lead the way higher and it feels like every four-letter ticker is going to the moon. That feeling is great, but eventually, the bullish tide is going to subside. When it does, you are going to see who has been swimming naked all along. Stocks with the strongest earnings trends are likely to stand the test of time, while stocks with weaker trends are likely to be in trouble. One way to find stocks with weaker earnings trends is by leaning on the Zacks Rank. Stocks which are Zacks Rank #5 (Strong Sell) stocks have negative earnings trends, which could mean tough times for the stock in the intermediate term.
One such stock is today’s Bear of the Day, DXP Enterprises (DXPE - Free Report) . DXP Enterprises, Inc., together with its subsidiaries, engages in distributing maintenance, repair, and operating (MRO) products, equipment, and services to energy and industrial customers primarily in the United States and Canada. It operates through three segments: Service Centers (SC), Supply Chain Services (SCS), and Innovative Pumping Solutions (IPS).
Over the last thirty days, analysts have been cutting their earnings estimates for DXPE. Analysts have dropped estimates for the current quarter, next quarter, current year and next year. The bearish sentiment is most dramatic in the current quarter where our Zacks Consensus Estimate is down from 37 cents to one penny. Current year numbers have gone from 99 cents to 49 cents, while next year’s number is off from $1.34 to 65 cents.
Current year earnings are now set to contract by 75%. That’s on revenue contraction of 19.74%. The good news for longer-term investors is that earnings are still projected to grow by 32.65% next year. That could mean a turnaround is in the cards.
DXP Enterprises is in the Manufacturing – General Industrial industry which ranks in the Bottom 30% of our Zacks Industry Rank. That does not mean that the entire industry is full of stocks at our lowest Zacks Rank. In fact, there are three stocks in the industry which are currently Zacks Rank #1 (Strong Buy) stocks. Those stocks include Kaman Corp (KAMN - Free Report) and EnPro Industries (NPO - Free Report) .
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