We have issued an updated research report on Colfax Corporation CFX on Jul 11.
The company currently carries a Zacks Rank #5 (Strong Sell). Its market capitalization is approximately $3.1 billion.
Let’s delve deeper and discuss what led to its poor investment appeal.
Share Price Performances & Earnings Estimate Revision: Market sentiments have been against Colfax for quite some time now. Its stock price has decreased roughly 14.1% in the past three months compared with the industry’s decline of 1.4%.
Also, it is worth noting that shares of the company have lost 3% since the release of first-quarter 2019 results on May 8, 2019. Furthermore, earnings estimates for the company for 2019 and 2020 have been lowered in the past 60 days. Currently, the Zacks Consensus Estimate for its earnings is pegged at $2.58 for 2019 and $2.61 for 2020, reflecting declines of 0.4% and 11.2% from the respective 60-day-ago numbers.
Colfax Corporation Price and Consensus
Colfax Corporation price-consensus-chart | Colfax Corporation Quote
Higher Costs and Expenses: Colfax’s cost of sales increased 6.4% year over year in the first quarter of 2019 while its selling, general and administrative expenses grew 58.7%. Inflation in steel and other items influenced results but pricing actions came in as a relief. Higher cost of sales in the quarters ahead might be detrimental, if uncontrolled.
Forex Woes: Geographical diversification exposed Colfax to headwinds arising from geopolitical issues, macroeconomic challenges and unfavorable movements in foreign currencies. Notably, forex woes lowered sales by 6.4% in the first quarter of 2019.
The company expects unfavorable movements in foreign currencies to adversely impact results in the first half of 2019.
High Debts: We believe that a highly leveraged balance sheet can be troubling for Colfax. Exiting the first quarter of 2019, the company's long-term debt was $4,037.1 million while its interest expenses have grown 203.7% year over year in the quarter. We believe that rising debt, if unchecked, will increase its financial obligations and might prove detrimental to its profitability in the future.
Stocks to Consider
Some better-ranked stocks in the industry are Roper Technologies, Inc. ROP, Chart Industries, Inc. GTLS and RBC Bearings Incorporated ROLL. While Roper currently sports a Zacks Rank #1 (Strong Buy), both Chart Industries and RBC Bearings carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 60 days, earnings estimates for all three stocks have improved for the current year. Further, average earnings surprise for the last four quarters was 8.43% for Roper, 16.56% for Chart Industries and 8.36% for RBC Bearings.
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