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Bearish Stance on Chart Industries

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Zacks Investment Research downgraded Chart Industries Inc. (GTLS - Free Report) to a Zacks Rank #5 (Strong Sell) on Feb 26, 2014. Going by the Zacks model, the companies holding a Zacks Rank #5 have strong chances of performing worse than the broader market and hence, investors seeking exposure to metal fabrication companies are recommended to either avoid investing in or to dispose-off their existing holdings in Chart Industries.

Why the Downgrade?

Chart Industries’ lackluster fourth-quarter 2013 results dampened market sentiments that led to nearly 10.0% fall in share price at the end of trading on Feb 25. Adjusted earnings per share were 82 cents compared with 80 cents recorded in the year-ago quarter and in line with the Zacks Consensus Estimate.

Revenues generated were $304 million, flat compared with the year-ago quarter and 4.6% below the Zacks Consensus Estimate of $319 million. Selling, general and administrative expenses increased 3.1% year over year.

Adding to lower-than-expected top- and bottom-line results, was Chart Industries’ guidance for 2014 which gave no reason to rejoice either. Revenues are expected within a range of $1.3–$1.35 billion while earnings per share are expected to be within the $3.10–$3.50 range.

Fourth-quarter 2013 results triggered downward revisions in earnings estimates for Chart Industries. In the last 7 days, the Zacks Consensus Estimate has fallen 9.4% to $3.38 for 2014 and 3.5% to $4.63 for 2015. Lowered earnings estimates along with a negative 13.5% average earnings surprise have made us dubious about Chart Industries’ performance in the coming quarters. We currently have an Earnings ESP of -6.9% for the first quarter 2014 and -1.3% for the second quarter.

Other Stocks to Consider

Chart Industries is a $2.5 billion company. Some better-ranked stocks in the same industry include DXP Enterprises, Inc. (DXPE - Free Report) , Kadant Inc. (KAI - Free Report) and Middleby Corp. (MIDD - Free Report) , all of which carry a Zacks Rank #1 (Strong Buy).

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