Investment Analysts’ Downgrades for April, 22nd (AWI, AYI, FBHS, KEYW, MD, PHM, RRGB, TWLO, WWW, YELP)
Armstrong World Industries (NYSE:AWI) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “Shares of Armstrong World have broadly outperformed its industry in a year's time frame. Higher price realization, strong repair and remodel activity along with the continuation of new building construction activity bode well for Armstrong World. However, earnings estimates have declined for 2019 over the past seven days, depicting analysts' concern for the company's earnings growth potential. Higher freight and raw material costs are dampening company’s earnings over the past few quarters. The steel and aluminum tariffs announced in 2018 continued to impact its material costs. Moreover, operational headwinds in the company’s manufacturing facilities along with stretched valuation raise concern.”
Acuity Brands (NYSE:AYI) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “Acuity Brands has outperformed the industry year to date. Its leading market position, diversified portfolio of innovative lighting control solutions and energy-efficient luminaries are substantial growth drivers. The company is expanding its geographic borders and product portfolio via acquisitions and joint ventures. The company has been undertaking certain actions that are offsetting higher input cost and the impact of tariffs. Notably, its overall growth rate and adjusted gross profit margin grew sequentially in the last reported quarter, given solid price increases and other cost-saving actions. However, shift in key customers, changes in sales channel mix and higher input costs are pressing concerns for the company. Earnings estimates for fiscal 2019 have remained stable over the past 60 days, limiting upside potential for the stock.”
KEYW (NASDAQ:KEYW) was downgraded by analysts at William Blair from an outperform rating to a market perform rating.
MEDNAX (NYSE:MD) was downgraded by analysts at Zacks Investment Research from a hold rating to a sell rating. According to Zacks, “Mednax’s shares have lost more than its industry in a year’s time. Elevated expenses remain a headwind for the company. Though the company has undertaken cost-curbing initiatives, high labor cost should keep exerting an upward pressure on salaries and the benefit component of total expenses. Anesthesia mix shift to Medicare is another challenge to the company. A bleak guidance also remains a concern for the company. Increasing debt will raise interest expense which puts pressure on margins. Nevertheless, it is well-poised for growth on the back of a consistent rise in revenues driven by operational excellence, inorganic growth and strong segmental performances. The company's prudent acquisitions poise it well for long-term growth. Although an Earnings ESP of 0.18% increases the predictive power of ESP, a Zacks Rank #4 (Buy) makes surprise prediction difficult as it is set to report its first-quarter earnings on May 2.”
PulteGroup (NYSE:PHM) was downgraded by analysts at Zacks Investment Research from a hold rating to a sell rating. According to Zacks, “Shares of PulteGroup have underperformed its industry year to date. Earnings estimates have remained unchanged for 2019 and 2020 over the past 30 days, limiting upside potential for the stock. Softness in homebuying demand, due to affordability challenges and general market uncertainty, is impacting the company's order flow. Moreover, weak first-quarter guidance for orders and gross margins, and lower backlog raise concerns. That said, PulteGroup continues to benefit from its land acquisition strategies that have resulted in improved revenues and profitability for quite some time now. Continued favorable trends in the economy and job growth are expected to more than offset the negative impact of modestly higher rates and rising material costs in the future.”
Red Robin Gourmet Burgers (NASDAQ:RRGB) was downgraded by analysts at Zacks Investment Research from a hold rating to a sell rating. According to Zacks, “Shares of Red Robin have underperformed the industry over the past year. We remain apprehensive of the company’s future performance. In the last-reported quarter, earnings and revenues declined due to decreasing traffic and weakness at in-line mall locations. Also, soft comps and high cost of sales as well as operating expenses are hurting Red Robin’s margins. Further, earnings estimates for the current year have been revised downward over the past 30 days, reflecting analysts’ concern surrounding the company’s earnings potential. However, Red Robin’s efforts to improve sales and regain market share via efficient menu innovation, focus on increasing service speed, effective marketing strategy and remodeling of programs bode well. Particularly, focus on value offerings and growing off-premise, online ordering business combine to ensure that Red Robin remains affordable.”
Twilio (NYSE:TWLO) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “Twilio is benefiting from a solid product menu and an increasing customer base. The company is not only gaining from a robust expansion of its existing clientele but is also aided by the first-time deals with the new ones, courtesy of Twilio’s firm focus on introducing products and the go-to-market sales strategy. Strong growth in the company’s core voice and messaging products is a key driver. Rising adoption of new products is also driving its dollar-based net expansion rate. Shares have outperformed the industry in the past year. Estimates have been stable ahead of the company's Q1 earnings release. However, heightening competition in the cloud telecommunications market is inducing pricing pressure for the company, which is an overhang on its profitability.”
Wolverine World Wide (NYSE:WWW) was downgraded by analysts at Zacks Investment Research from a hold rating to a sell rating. According to Zacks, “Wolverine has lagged the industry in the past six months. The company’s top line has been declining due to store closures and portfolio changes made earlier in 2017. Going ahead, Management expects first-quarter 2019 performance to be impaired by challenges in the Saucony business, soft demand for Wolverine Leathers, industry bankruptcies as well as reduced demand from few international partners. Also, the company is exposed to significant currency risks. On the flip side, Wolverine’s bottom line record is a breather. The company’s earnings surpassed the consensus mark and surged 26.8% in the fourth quarter of 2018. Further, it is progressing well with the GLOBAL GROWTH AGENDA, which focuses on empowering brands, augmenting the digital platform and growing internationally.”
Yelp (NYSE:YELP) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “Yelp is benefiting from strong growth in ad revenues. The company’s shift toward selling advertising plans without any fixed duration is leading to a robust increase in paying advertiser accounts. The collaboration with GrubHub is a tailwind for Yelp as it provides users with access to a significant number of restaurants available for food ordering on the platform. Besides, the company is witnessing acceleration in consumer traffic across app unique devices. Significant improvement in cumulative reviews is also encouraging. Shares have outperformed the industry in the past year. Estimates have been stable lately ahead of the company’s Q1 earnings release. However, increase in operating expenses driven by an increase in headcount, product development and sales & marketing expenses will remain an overhang on the bottom line. Stringent competition from search giants like Google is a concern.”
Yum! Brands (NYSE:YUM) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “Shares of Yum! Brands have outperformed the industry in the past three months. We are encouraged by the company’s solid prospects despite the fact that it missed earnings estimates in the fourth quarter. Moreover, Yum! Brands’ endeavors to drive growth by employing greater focus on the development of its three iconic global brands, increasing its franchise ownership, and creating a leaner and more efficient cost structure bode well. In an effort to enhance guest experience, the company has been focusing on deploying technology to more restaurants. Over the next three years, it expects to return an additional $6.5-$7 billion to its shareholders and predicts EPS of at least $3.75 in 2019. However, high costs of restaurant operations and soft sales due to refranchising are near-term concerns for the company. Estimates for current-quarter and year have been stable over the past 30 days.”
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