Why Encore Wire (WIRE) Could Be Positioned for a Slump

Zacks

Similar to wise buying decisions, exiting certain underperformers at the right time helps maximize portfolio returns. Selling off losers can be difficult, but if both the share price and estimates are falling, it could be time to get rid of the security before more losses hit your portfolio.

One such stock that you may want to consider dropping is Encore Wire Corp. (WIRE), which has witnessed a significant price decline in the past four weeks, and it has seen negative earnings estimate revisions for the current quarter and the current year. A Zacks Rank #5 (Strong Sell) further confirms weakness in WIRE.

A key reason for this move has been the negative trend in earnings estimate revisions. For the full year, we have seen 1 estimate moving down in the past 30 days, compared with no upward revision. This trend has caused the consensus estimate to trend lower, going from $2.60 a share a month ago to its current level of $2.10.

Also, for the current quarter, Encore Wire has seen 1 downward estimate revision versus no revision in the opposite direction, dragging the consensus estimate down to 55 cents a share from 73 cents over the past 30 days.   

The stock also has seen some pretty dismal trading lately, as the share price has dropped 10.8% in the past month.

So it may not be a good decision to keep this stock in your portfolio anymore, at least if you don’t have a long time horizon to wait.

If you are still interested in the industrial products sector, you may instead consider some better-ranked stocks including Blount International Inc. (BLT), HollySys Automation Technologies, Ltd. (HOLI) and Multi-Color Corp. (LABL). All these stocks hold a Zacks Rank #1 (Strong Buy) and may be better selections at this time.

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