Bear of the Day: Simpson Manufacturing (SSD)

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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JAMES HARDI-ADR (JHX): Free Stock Analysis Report

PGT INC (PGTI): Free Stock Analysis Report

SIMPSON MFG INC (SSD): Free Stock Analysis Report

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