Bear of the Day: Simpson Manufacturing (SSD) - Bear of the Day
May 06 2013 - 11:35PM
Zacks
While the construction market may be coming back to start 2013,
not all companies have been able to ride the wave higher. In
particular, investors have seen weakness in many names in the
miscellaneous building and construction segment, such as
Simpson Manufacturing (SSD).
Simpson Manufacturing makes a variety of fasteners, connectors,
and adhesives that are key to many construction processes and thus
seems like the perfect type of company to participate in a building
segment recovery. However, this hasn’t been the case so far in 2013
as SSD has lost about 16% of its value so far this year.
What Happened?
The main catalyst for SSD’s slide has been its sluggish results
on both an earnings and a revenue front. In the last quarterly
report, revenues slid by over 2.6% from the year ago period while
EPS missed the consensus and also represented a slump from the year
ago time frame.
Thanks to this and a poor outlook, the analysts covering SSD
have begun to drastically lower their expectations for the firm. In
fact, all of the new estimates have been lower, with the consensus
estimate trending south in all of the time periods that we
cover.
Furthermore, the firm has a terrible track record when it
reports earnings, as it has missed by a pretty wide margin in all
four of the previous releases. In fact, a -10% miss for the 09/12
quarter was actually a ‘good’ one for the firm, as the average of
the past four has been a miss of nearly -48%.
Due to this trend, the stock has earned itself a Zacks Rank of 5
or ‘Strong Sell’ suggesting that it will underperform in the near
future. And, from a longer term look, the stock is also expected to
be sluggish as the firm has a Zacks Recommendation of
‘underperform’ meaning that the 6+ month outlook is also pretty
terrible.
Better Options
If investors are looking for other choices in the building space
that have been able to take advantage of the positive trends in the
market, there are a few better ranked picks out there. While there
aren’t any Zacks Ranks of 1 in the segment, we do have a couple of
stocks that have a Zacks Rank of 2 or ‘Buy’, including
James Hardie Industries (JHX) and PGT Inc
(PGTI).
Both of these companies have seen triple digit EPS surprises in
the past quarter, and stocks that are in the green for the calendar
year so far. Furthermore, they have both seen their ranks move up
from holds or worse into buy territory in the past week, suggesting
that now could be a great time to look at these two firms instead
of the sluggish SSD to play a construction recovery.
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