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Falling Earnings Estimates Signal Weakness Ahead for Kratos Defense & Security Solutions (KTOS)
March 18, 2014
KTOS ATRO BAESY
Similar to wise buying decisions, exiting certain underperformers at the right time helps maximize portfolio returns. Selling off losers can be difficult, but if both the share price and estimates are falling, it could be time to get rid of the security before more losses hit your portfolio.
One such stock that you may want to consider dropping is Kratos Defense & Security Solutions, Inc. ( KTOS - Snapshot Report) which has witnessed a significant price decline in the past four weeks, and it has seen negative earnings estimate revisions for the current quarter and the current year. A Zacks Rank #4 (Sell) further confirms weakness in KTOS.
A key reason for this move has been the negative trend in earnings estimate revisions. For the full year, we have seen 3 estimates moving down in the past 30 days, compared with no upward revisions. This trend has caused the consensus estimate to trend lower, going from 42 cents a share a month ago to its current level of 16 cents.
Also, for the current quarter, Wet Seal has seen 1 downward estimate revisions versus no revisions in the opposite direction, dragging the consensus estimate down to a loss of 11 cents a share from a profit of 5 cents over the past 30 days.
The stock also has seen some pretty dismal trading lately, as the share price has dropped 10.4% in the past month.
So it may not be a good decision to keep this stock in your portfolio anymore, at least if you don’t have a long time horizon to wait.
If you are still interested in the industrials sector, you may instead consider some better-ranked stocks including Alliant Techsystems Inc. , Astronics Corporation ( ATRO - Snapshot Report) and BAE Systems plc ( BAESY - Snapshot Report) . All these stocks carry a Zacks Rank #1 (Strong Buy) and may be better selections at this time.
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