On July 4, Zacks Investment Research downgraded Rexam plc (REXMY) to a Zacks Rank #5 (Strong Sell).
Rexam plc’s earnings estimates and share price witnessed a downward trend following its announcements on Jun 25 that its interim as well as full year 2013 results would be lower than previously expected as well as the intention to sell its Healthcare business.
The global consumer packaging company noted that beverage can volume growth has been slower than expected this year mainly due to the weather. Even though North America has held up, volumes have been weak in South America and Western Europe in April and May. For the five months till the end of May, global volumes edged up 1% compared with the prior-year period. The company expects operating profit to decline year-over-year in the first half of fiscal 2013.
Rexam expects full-year performance to be lower than previously anticipated. As a reminder, the company during its announcement of interim results ended Jan 2013 on Apr 18 had mentioned a target of achieving 15% return on capital employed for fiscal 2013.
However, volumes have shown some improvement in Brazil in June and the second half should benefit from increased cost reductions and certain contractual price/volume arrangements in Europe.
Over the last 30 days, the Zacks Consensus Estimate for fiscal 2013 decreased 6% to $2.99 per share and for fiscal 2014 it went down 4% to $3.26 per share.
Other Stocks to Consider
Not all stocks in the paper and related products industry are performing as poorly as Rexam plc. Domtar Corporation (UFS), KapStone Paper and Packaging Corporation (KS), with a Zacks Rank #1(Strong Buy), and Rock-Tenn Company (RKT), carrying a Zacks Rank #2 (Buy), are some stocks worth considering.
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