Zacks Investment Research downgraded Alamo Group, Inc. (ALG) to a Zacks Rank #5 (Strong Sell) on January 8, 2013.
Why the Downgrade?
Two consecutive quarters of negative earnings surprise, with 15.5% in the third quarter and 2.5% in the second quarter of 2012, have been detrimental to the outlook for the company. Average earnings surprise for the trailing four quarters is a negative 2.7%.
The Zacks Consensus Estimate for year 2012, though increased by a cent to $2.34 per share, went down 4.5% to $2.33 for year 2013 in the last 60 days.
Third quarter 2012 results were released on November 6. The company reported earnings per share of 71 cents, down 15% from 84 cents reported in the year-ago quarter and well below the Zacks Consensus Estimate of 84 cents. Results were largely impacted by weak sales reported in the company’s North American Agricultural Division and European Division.
Increase of 1% and 5% in cost of sales and operating expenses, respectively, impacted operating profits of the company that registered a 10.0% fall in the quarter. Operating margins settled at 8.4%, 90 basis points below the year-ago margins.
Other Stocks to Consider
Not all farm and construction machinery stocks are performing as poorly as Alamo Group. Lindsay Corporation (LNN), carrying a Zacks Rank #1 (Strong Sell), is performing well and is worth considering.
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