Zacks Investment Research downgraded OCI Partners LP (OCIP) to a Zacks Rank #5 (Strong Sell) on May 21, 2014. Going by the Zacks model, companies holding a Zacks Rank #5 have strong chances of underperforming the broader market.
Why the Downgrade?
OCI Partners LP’s first-quarter 2014 results were disappointing as the net income was down 36.2% year over year. Earnings were 36 cents per limited partner unit, lagging the Zacks Consensus Estimate of 48 cents per limited partner unit.
Revenues declined 11.2% year over year to $99.6 million. The weak top-line result coupled with a 14.2% increase in cost of sales led to a nearly 28.9% fall in gross profits. Gross margin declined by 11.7% year over year. Distribution was 41 cents per unit in the quarter.
For 2014, OCI Partners LP anticipates cash distributions to fall at the lower end of the company’s previously guided range of $2.00−$2.20 per unit. The revised guidance is based on the increase in prices of natural gas and fall in methanol prices, partially offset by the hike in ammonia prices.
Weak quarter results and the lowered guidance led to a 2.5% fall in OCI Partners LP’s unit price on May 13 as well as triggered downward revisions in earnings estimates. Over the last 30 days, the Zacks Consensus Estimate has decreased by 1.6% to $1.85 per unit for 2014 and by 0.8% to $2.42 per unit for 2015. Also, OCI Partners LP has an Earnings ESP of -1.62% for 2014 and -1.65% for 2015.
Other Stocks to Consider
OCI Partners LP presently has a market capitalization of $1.7 billion. Other stocks worth considering in the chemical industry include Compass Minerals International Inc. (CMP), L'Air Liquide SA (AIQUY) and Koninklijke DSM N.V. (RDSMY). While Compass Minerals International sports a Zacks Rank #1 (Strong Buy), L'Air Liquide and Koninklijke DSM hold a Zacks Rank #2 (Buy).