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Here's Why You Should Dump Gibraltar Industries (ROCK) Stock

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We believe that weakness expected in Industrial and Infrastructure Products business, poor volume and backlog, and escalating input prices have weakened  Gibraltar Industries, Inc’s (ROCK - Free Report) prospects.

It currently carries a Zacks Rank #5 (Strong Sell). Investors are advised to sell off their current holdings or avoid gaining exposure in the stock.

In the last three months, the company’s shares have lost 10.1%, wider than 0.5% decline of the industry it belongs to.

Why the Downgrade?

In the past 60 days, earnings estimates for the stock have been revised downward, reflecting negative sentiments. The Zacks Consensus Estimate for third-quarter 2017 declined 12.9% to 54 cents while the same decreased 4.3% to $1.55 for 2017 and 9.8% to $1.74 for 2018.

We believe that dismal second-quarter 2017 results as well as weak outlook have led to this pessimistic view on the stock. Adjusted earnings per share came in 16% below the year-ago tally due to a fall in revenue generation in the quarter. The Industrial and Infrastructure Products segment suffered from divestiture of its bar grating product line in the United States and European industrial operations. Also, challenging conditions in overseas energy markets and divestiture of the company’s European raking solar business adversely impacted Renewable Energy and Conservation segment.

For 2017, the company anticipates adjusted earnings to be $1.57-$1.70 per share, roughly flat year over year. Revenues will likely be $970-$980 million, down roughly 2-3% year over year due to lackluster results expected from Industrial and Infrastructure Products segment as a result of divestiture of certain businesses and lesser sales volume. Also, poor volumes and backlog will remain an issue. Escalating prices of raw materials are expected to adversely impact margins and reduce profitability to the tune of 20 cents in second-half 2017.

In addition, we believe that risks arising from issues like unfavorable government funding programs and sudden decline in market share might hurt the company’s near-term performance.

Stocks to Consider

Gibraltar Industries has a market capitalization of approximately $923.5 million. Some stocks worth considering in the industry are Owens Corning (OC - Free Report) , TopBuild Corporation (BLD - Free Report) and Patrick Industries, Inc. (PATK - Free Report) . While both Owens Corning and TopBuild Corporation sport a Zacks Rank #1 (Strong Buy), Patrick Industries carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Owens Corning’s earnings estimates for 2017 and 2018 were revised upward in the last 60 days. Also, the company pulled off an average positive earnings surprise of 20.17% in the last four quarters.

TopBuild Corporation’s earnings estimates for 2017 and 2018 improved in the last 60 days. It delivered better-than-expected results in the last four quarters, with a positive average earnings surprise of 10.42%.

Patrick Industries’ earnings estimates for 2017 and 2018 were revised upward in the last 60 days. In the last quarter, the company delivered a positive earnings surprise of 10.34%.

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