Zacks Investment Research downgraded Luxfer Holdings plc (LXFR) to a Zacks Rank #5 (Strong Sell) on Jan 7, 2014.
Why the Downgrade?
Luxfer Holdings’ third quarter 2013 results, reported on Nov 2013, were disappointing as adjusted net income fell 7.9% year over year. Earnings per ADS of 33 cents were roughly 5.7% below the Zacks Consensus Estimate of 35 cents.
Revenues in the quarter were up 4.7% year over year on the back of healthy performance at the company’s Gas Cylinders Division, offset by a 2.5% revenue shortfall recorded at the Elektron Division.
Talking of expenses and margins, cost of sales in the quarter represented 75.8% of total revenues, an increase from 74.1% reported in the year-ago quarter. Adjusted EBITDA margin in the quarter was down 210 basis points.
Luxfer Holdings expects the European markets to cast a negative impact on fourth-quarter earnings results. For 2013, trading profit is expected to be on the lower end of the previously announced $60.5 million to $63.5 million range. Moreover, earnings per ADS are expected in the range of $1.40 to $1.43.
In the last 60 days, the Zacks Consensus Estimate for Luxfer Holdings has gone down by 1.4% to $1.40 for 2013 and by 5.8% to $1.62 for 2014. Downward revision in earnings estimates as well as negative average earnings surprise of 1.24% for the trailing four quarters raises skepticism over future performance. Currently, we have an Earnings ESP of -2.7% for the fourth quarter 2013, -0.7% for 2013 and -1.2% for 2014.
Other Stocks to Consider
Luxfer Holdings currently has a market capitalization of $571.6 million and operates in the diversified machinery industry. Some-better ranked stocks in the industry include Middleby Corp. (MIDD), Altra Industrial Motion Corp. (AIMC) and Magna International Inc. (MGA). While Middleby holds a Zacks Rank #1 (Strong Buy), both Altra Industrial and Magna International carry a Zacks Rank #2 (Buy).