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Bear of the Day: Douglas Dynamics (PLOW)

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Finally, the market is back to trading at all-time highs. We can thank the FOMC for their contributions with their upcoming easing. Now if we can get a US-China trade deal done, there will be no stopping us at all. With all this momentum, it may feel like you can run out there and buy any stock that shows up on your computer screen. I’m going to warn you against that. Eventually, the momentum will die down and those stocks with weak earnings trends will come under pressure. One way to avoid these weak trends is by leaning on the Zacks Rank. Those stocks with favorable Zacks Ranks have very strong earnings trends. Those with weak ranks, have been coming under pressure.

Today’s Bear of the Day is a stock with a weaker earnings trend. I’m talking about Zacks Rank #5 (Strong Sell) Douglas Dynamics (PLOW - Free Report) . Douglas Dynamics, Inc. operates as a manufacturer and upfitter of commercial work truck attachments and equipment primarily in North America. It operates in two segments, Work Truck Attachments and Work Truck Solutions. The Work Truck Attachments segment manufactures and sells snow and ice control attachments, including snowplows, and sand and salt spreaders for light and heavy duty trucks, as well as various related parts and accessories. 

The Automotive – Replacement Parts industry is in the Bottom 14% of our Zacks Industry Rank. Douglas Dynamics is a Zacks Rank #5 (Strong Sell). The reason for the unfavorable rank lies in recent earnings estimate revisions to the downside coming from analysts. Looking at the next quarter number, analyst has dropped his number, bringing down our Zacks Consensus Estimate from 54 cents to 43 cents. That 43-cent number would represent a 2.2% contraction in earnings. Current year growth estimates are for 3.9%.

It’s important to point out that next year’s EPS growth looks better. In fact, over the last sixty days, analysts have increased their numbers for next year. That’s pushed up the Zacks Consensus Estimate from $2.35 to $2.42. While next quarter could be a little rough, things are looking much better over the long-term.

Investors looking for other stocks within the same industry with more favorable ranks are not going to find much. The best Zacks Rank in the industry is a Zacks Rank #3 (Hold). Those stocks include Dorman Products DORM and Standard Motor Products SMP.

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