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Bear of the Day: Black Diamond (BDE)

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Broadly speaking, the American consumer is back on track as spending levels are up year-over-year, while confidence levels remain high. This has pushed many investors back into a variety of leisure stocks, as these seem poised to lead the recovery higher.

Yet, while many of the companies in this space are seeing estimates and stock prices rise as we approach the summer months, the rosy outlook hasn’t hit every firm in the space. Take for example Black Diamond (BDE), a leisure product company that hasn’t been able to convince investors that it too is poised for better days ahead.

Black Diamond in Focus

BDE is a Utah-based firm that specializes in outdoor recreation equipment and active lifestyle products. This includes rock-climbing equipment, tents, skis, and generally everything you need to climb up or go down a mountain.

One might think that this is the perfect type of company to benefit from a free-spending consumer that is anxious to splurge and participate in various outdoor leisure activities. However, this has definitely not been the case so far in 2013, and it doesn’t appear likely to materialize in the near term either.

Weak Estimates Picture

Black Diamond has seen a pretty mixed picture from an analyst agreement look, as most estimates for shorter time periods have gone higher, while full year estimates have moved lower. Don’t be fooled by this though, as the consensus trend has been falling like a stone, suggesting that rough times could be ahead for this company.

This is especially true when investors look at the current year forecasts as these have seen the biggest revisions lower. In fact, the consensus 90 days ago called for full year earnings of 16 cents a share, while today’s consensus actually calls for a loss in the 2013 fiscal year of one cent a share.

Clearly there has been a pretty dramatic shift in perceptions about Black Diamond, and there should be little hope for the company to beat these tumbling estimates either. The company has actually missed both of the last two consensus estimates, and has actually seen an average quarterly surprise of -36.11% over the past year.

These factors are pulling Black Diamond into dreaded Zacks Rank #5 (Strong Sell) territory, suggesting that the stock will underperform in the near term. This would continue the underperformance by the company so far in 2013, as it has lagged behind the broad consumer market (as represented by the popular ETF (XLY - Free Report) ) by a pretty wide margin this year, meaning that the trend could definitely continue in this space.  

Better Picks in the Leisure Space

Instead of the sluggish Black Diamond, investors may want to look to other options in the space. After all, the leisure industry has a relatively favorable Zacks Industry Rank and there are some pretty good trends underpinning the consumer market.

Some solid picks in this industry include Brunswick (BC - Free Report) and Pool Corporation (POOL - Free Report) . Both of these firms have Zacks Ranks of 2 or Buy, and are expected to be profitable this year, unlike BDE. Furthermore, BC and POOL have seen their Zacks Ranks move up from 3s a week ago, suggesting that investors may want to look here instead of Black Diamond for consumer exposure.

This is especially true when you consider that BDE is the only company in the leisure segment that has a rank of 4 or worse, and that its Rank has fallen from a hold a week ago to its current bottom echelon ranking.

In other words, literally any other company in the leisure and recreation product space has a better Rank than BDE. So you should stay far away from this lowly Ranked stock until it can turn its story around, and find a way to grow earnings once more like others in the space.  

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