Equities Research Analysts’ downgrades for Thursday, February 14th:
Aerojet Rocketdyne (NYSE:AJRD) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “With an experience of supplying some of the world’s most technologically advanced propulsion systems for over 70 years, Aerojet Rocketdyne serves a broad range of customers. Moreover, Aerojet Rocketdyne continues to expand its strong legacy propulsion franchises on the Standard Missile, Patriot Advanced Capability-3 (PAC-3), Terminal High Altitude Area Defense (THAAD) and Guided Multiple Launch Rocket System (GMLRS) missile propulsion systems. Aerojet Rocketdyne’s shares outperformed its industry in past 12 months. However, of late, the company is facing increased competition from entrepreneurs such as SpaceX and Blue Origin, which in turn can hurt its top-line performance. Aerojet Rocketdyne is subject to interest rate risk related to the issuance of debt. With the current U.S. economy being in favor of expanding interest rate, the credit market may not turn out to be much favorable for Aerojet Rocketdyne.”
Get Aerojet Rocketdyne Holdings Inc alerts:AK Steel (NYSE:AKS) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “AK Steel swung to profit in fourth-quarter 2018. Adjusted earnings beat the Zacks Consensus Estimate while sales trailed the same. AK Steel is expected to benefit from the strength in the automotive market and the Precision Partners acquisition. The buyout of Precision Partners has boosted its portfolio of high-value products and processes. The company’s sustained initiatives to manage costs should also support its bottom line. However, AK Steel is exposed to an inflationary raw material pricing environment. It also faces headwinds from planned maintenance outages. Softening of spot market prices is another concern. AK Steel has also underperformed the industry it belongs to over a year.”
Amphenol (NYSE:APH) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “Amphenol is benefiting from its end-market strength. As evident from fourth-quarter results, revenues are being driven by strong organic growth across mobile devices, military, IT and data communications, mobile networks, commercial air and broadband. Moreover, continuing focus on geographic and market diversification has enabled Amphenol to extend its presence into new customers and new applications. Shares have outperformed the industry in the past year. However, management expects first quarter sales to be negatively impacted by global economic uncertainties related to trade policy and weakness in the mobile devices end market. The geopolitical uncertainty particularly related to the U.S.-China relationship remains a major headwind.”
Cadence Design Systems (NASDAQ:CDNS) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “Cadence is benefiting from robust adoption of the company’s digital and signoff, custom and analog, and IP solutions. Particularly, significant demand from aerospace and defense sectors is a key catalyst. Also, collaboration with Azure, AWS and Google Cloud platform to enable smooth design development of electronic systems and semiconductors, bodes well. Sturdy pipeline of Cadence’s innovative cloud-ready solutions hold promise. Moreover, increasing investments on emerging trends like IoT, AR/VR and autonomous vehicle sub-systems present significant growth opportunity. Cadence has positive record of earnings surprises in trailing three quarters. Cadence stock has outperformed the industry in the past year. However, reducing semiconductor budgets on EDA software, intensifying competition, currency exposure and high indebtedness are major headwinds. Notably, estimates have been stable lately ahead of company’s Q4 earnings release.”
CRA International (NASDAQ:CRAI) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “Charles River Associates has a diversified business with service offerings across areas of functional expertise, client base and geographical regions. The company’s strong global network provides the opportunity to work with the world's leading professionals on multiple issues. An excellent professional team has helped the company to maintain solid reputation for high-quality consulting services focused on economic, financial and management consulting areas. On the flip side, seasonality continues to weigh on Charles River Associates’ top line. Operation in a highly competitive and fragmented economic and management consulting services industry remains a concern. The nature of business makes Charles River Associates’ vulnerable to foreign exchange risk. The company’s shares have underperformed its industry in the past year.”
Ellie Mae (NYSE:ELLI) was downgraded by analysts at William Blair from an outperform rating to a market perform rating.
Telefonaktiebolaget LM Ericsson (NASDAQ:ERIC) was downgraded by analysts at Zacks Investment Research from a hold rating to a strong sell rating. According to Zacks, “Ericsson’s business is exposed to geopolitical uncertainties in its operating countries. The company operates in an extremely competitive environment, which comprises big multinational wireless telecom service providers. It faces competition from new and innovative business models in mobile broadband and Internet services. Moreover, soft mobile broadband demand and challenging macroeconomic conditions in the emerging markets are acting as a deterrent for major investments by telecom behemoths and this may hurt Ericsson’s financial performance going forward. The ongoing industry consolidation among customers and major rivals are posing threat to Ericsson, impacting investments adversely and intensifying price competition. However, the stock has outperformed the industry over the past year on an average. The Swedish firm’s R&D investments over the past two years have secured a competitive and industry-leading offering.”
G-III Apparel Group (NASDAQ:GIII) was downgraded by analysts at Zacks Investment Research from a hold rating to a sell rating. According to Zacks, “Shares of G-III Apparel have decreased and underperformed the industry in the past three months. In fact, third-quarter fiscal 2019 results marked the company’s first top-line miss in a long time. The company has been grappling with sluggishness in the retail category, thanks to weakness in underlying brands and store closures. During the third quarter, retail segment net sales fell 7% due to decline across Wilsons and G.H. Bass stores. Moreover, stiff competition and foreign exchange fluctuations remain woes. Nevertheless, the company’s bottom line beat the estimate and improved year over year in the third quarter. Performance in the said period gained from a robust wholesale business as well as strength in DKNY stores. Further, management is impressed with growth witnessed at DKNY and Donna Karan brands. It has been undertaking efforts to expend these banners globally, mainly through augmenting licensing capabilities.”
ICF International (NASDAQ:ICFI) was downgraded by analysts at Zacks Investment Research from a hold rating to a sell rating. According to Zacks, “ICF International is seeing escalation in costs because it is making significant investments in capture and proposal activities, infrastructure and intellectual property development, loyalty program and acquisitions. Also, it remains embroiled with various legal matters and proceedings including the one associated with, the Road Home contract. Considerable variations in revenues and profit are expected from time to time in accordance with ups and downs in the global economy. Despite such headwinds, the company’s international government business remains strong, courtesy of improvement in business development pipeline and win rate. ICF is also banking on opportunities emerging from the bipartisan budget agreement. Shares of ICF International has outperformed the industry in the past year.”
InterDigital Wireless (NASDAQ:IDCC) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “InterDigital’s global footprint, diversified portfolio and ability to penetrate in different markets are commendable. The acquisition of the patent licensing business of Technicolor is likely to provide it with an enhanced portfolio of video technologies while opening up new opportunities in the consumer electronics market. The company’s commitment toward licensing its broad portfolio of technologies to wireless terminal equipment makers, allowing it to expand its core market, is noteworthy. However, decline in return on capital despite rise in capital spending and capitalized patent costs remains a concern for InterDigital. Moreover, ongoing tensions between the United States and China due to trade restrictions imposed on the sale of communication equipment and technology solutions are likely to hurt the industry's credibility and induce loss of businesses. The stock has underperformed the industry in the past year on average.”
Jazz Pharmaceuticals (NASDAQ:JAZZ) was downgraded by analysts at Zacks Investment Research from a hold rating to a sell rating. According to Zacks, “Jazz Pharmaceuticals’ sleep disorder drug, Xyrem, has witnessed improved volume trends so far in 2018, sales were disappointing in 2017. Notably, Xyrem generates majority of sales, and consequently any setback is likely to hamper Jazz’s top-line. Moreover, Jazz has been facing supply crunch for its leukemia drug, Erwinaze, owing to constrained manufacturing capacity. These supply challenges are expected to continue in 2019. Meanwhile, its newest drug Vyxeos performed below expectations leading Jazz to lower its full-year outlook. However, management seems confident that Xyrem will continue to generate volume growth in future quarters. The company’s lead pipeline candidate solriamfetol complements its existing sleep disorder portfolio. Estimates movement remianed mixed ahead of Q4 earnings. Jazz has a positive record of earnings surprises in the recent quarters.”
Kirkland’s (NASDAQ:KIRK) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “Kirkland’s shares have outpaced the industry in the past three months, largely backed by its impressive top-line history. Markedly, the company’s sales have been growing year on year for 12 straight quarters. This reflects that management’s efforts to attract customers have been yielding. In fact, e-commerce sales have been consistently rising and contributed almost 12% to total sales in third-quarter fiscal 2018, backed by greater website traffic and average ticket. The company’s performance has also been gaining from frequent store openings. However, Kirkland’s gross margin has been dismal for a while. During the third quarter, gross margin plummeted due to lower merchandise margins. Further, rising store occupancy costs and freight expenses have marred the company’s profitability. Incidentally, Kirkland’s delivered an adjusted loss in the third quarter, wider than the loss registered in prior year period.”
Ross Stores (NASDAQ:ROST) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “Ross Stores surpassed the industry in the past year owing to its robust earnings surprise trend. Notably, the company delivered its 10th consecutive earnings beat in third-quarter fiscal 2018. Earnings gained from ongoing success in delivering broad assortments of compelling bargains to value-focused customers. Moreover, its commitment to better price management, merchandise initiatives, cost containment and store expansions bode well. Additionally, the company raised earnings outlook for fourth quarter and fiscal 2018. However, headwinds related to higher freight costs and wage investments have been hurting margins for a while. Notably, these headwinds weighed upon the company’s operating margin and led to higher cost of goods sold and SG&A expenses, in the fiscal third quarter. The company expects freight and wage investment-related constraints to continue impacting operating margins throughout fiscal 2018.”
Stewart Information Services (NYSE:STC) was downgraded by analysts at Zacks Investment Research from a hold rating to a sell rating. According to Zacks, “Stewart Information Services Corporation’s primary business is title insurance. Stewart issues policies through issuing locations on homes and other real property located in all 50 states, the District of Columbia and several foreign countries. Stewart also sells computer-related services and information, as well as mapping products and geographic information systems, to domestic and foreign governments and private entities. “
TENCENT HOLDING/ADR (OTCMKTS:TCEHY) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “Tencent Holdings Limited is an Internet service portal. Tencent provides value-added Internet, mobile and telecom services and online advertising. Tencent’s leading Internet platforms in China are QQ Instant Messenger, QQ.com, QQ Games, Qzone, 3g.QQ.com, SoSo, PaiPai and Tenpay. It has brought together China’s largest Internet community, to meet the various needs of Internet users including communication, information, entertainment, e-commerce and others. Tencent Holdings Limited is headquartered in Shenzhen, the People’s Republic of China. “
Toll Brothers (NYSE:TOL) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “Shares of Toll Brothers have outperformed its industry over the past three months. Estimates have also been trending upward for the current year over the past 30 days. Robust economy, improving demographics and financial health of its affluent customer base bode well for Toll Brothers. Also, lack of competition in the luxury new home market is expected to drive growth for Toll Brothers as it enjoys greater pricing power than other homebuilding companies. Solid growth in revenues (up 23%) and deliveries (up 16%) in fiscal 2018, following a gain of 12% and 17%, respectively, in fiscal 2017, reflects the health of the luxury new home market. However, escalating building material and labor costs that are proving to be a drag on margins. Again, high mortgage rates dilute the demand for new homes as mortgage loans become expensive.”
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