Zacks Investment Research downgraded Chart Industries Inc. (GTLS) to a Zacks Rank #5 (Strong Sell) on Nov 13, 2013.
Why the Downgrade?
Shares of Chart Industries have fallen roughly 11% since the company reported its financial results for the third quarter of 2013 on Oct 31. The company’s earnings per share of 82 cents were 8.9% below the Zacks Consensus Estimate of 90 cents. However, compared with the year-ago quarter, results reflected an improvement of 24%.
Revenue in the quarter increased 18.7% year over year as revenue fall in Energy & Chemicals segments were more than offset by healthy performances at Distribution & Storage as well as BioMedical segments. Orders in the quarter were roughly flat compared with the year-ago period. Gross margin in the quarter fell 130 basis points as cost of sales represented a higher percentage of revenue in the quarter. Roughly 21% increase was recorded in cost of sales. Selling, general and administrative expenses increased 13.7% year over year.
For 2013, management of Chart Industries has revised down its revenue and earnings guidance. Sales are now anticipated to be within $1.175-$1.225 billion range versus $1.2-$1.3 billion range expected earlier, while earnings per share are expected to be within $2.90-$3.00 versus $3.10-$3.40 expected earlier.
Weak order pattern along with lowered guidance for 2013 has led to downward revision in earnings estimates in the last 30 days for Chart Industries. The Zacks Consensus Estimate has gone down by 8.4% to $2.95 for 2013 and has declined 7.5% to $4.06 for 2014.
Also, Chart Industries had negative earnings surprise in two out of four trailing quarters, with the average being a negative 7.3%. We currently have an Earnings ESP of -8.9% for the fourth quarter of 2013 and -2.2% for 2014.
Other Stocks to Consider
Chart Industries is a $2.93 billion company, operating in the metal fabrication industry. Other stocks to watch out for in the industry are Xylem Inc. (XYL) with Zacks Rank #1 (Strong Buy). Middleby Corp. (MIDD) and Graham Corp. (GHM), where each come with a Zacks Rank #2 (Buy).