Investment Analysts’ downgrades for Monday, August 14th:
Applied Materials (NASDAQ:AMAT) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “Applied Materials is one of the world’s largest suppliers of fabrication equipment to semiconductor, LCD and solar PV cell manufacturers. The company's second quarter fiscal 2017 results beat the Zacks Consensus Estimate on earnings and revenues. Over the last one year, the stock has outperformed the industry it belongs to. Applied Materials is in a great position to grow sustainably and profitably based on its strong pipeline of enabling technologies, supported by expanding opportunities on the semiconductor, service and display fronts. Nevertheless, high fixed cost structure and customer concentration remain concerns.”
TD Ameritrade Holding Corporation (NASDAQ:AMTD) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “TD Ameritrade has outperformed the industry in the past year. The company’s third-quarter fiscal 2017 results surpassed the Zacks Consensus Estimate. Results reflected increased revenues and eased margin pressure. The company recorded a rise in average client trades per day in the fiscal third quarter with the trend continuing in the first month of the current quarter, indicating trading activity improvement. Further, its deal to acquire Scottrade is likely to be accretive to earnings per share (EPS) in double digits. Though we remain cautious of the elevated costs, which are likely to weigh on the financials, TD Ameritrade’s steady capital deployment activities are encouraging.”
Cooper Companies, Inc. (The) (NYSE:COO) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “The Cooper Companies generates a significant part of its revenues in foreign currencies. Thus, the ongoing unfavorable currency translation is expected to negatively impact the company’s top-line growth in 2017. Furthermore, intensifying competition in the contact lens will continue to increase pricing pressure for the company. Also, the stocks overvaluation reflects a relatively dull scenario that might be a cause for investors’ concern. However, the company ended second-quarter fiscal 2017 with the Zacks Consensus Estimates beating on both lines. On a positive note, the company outperformed the broader industry in terms of price performance over the past six months. The Cooper Companies have always had an impressive show from its CooperSurgical business segment. The CooperVision segment also delivered strong sales in the last quarter, buoyed by robust performance by Toric.”
Endocyte (NASDAQ:ECYT) was downgraded by analysts at Zacks Investment Research from a hold rating to a sell rating. According to Zacks, “Endocyte reported wider than expected loss in second-quarter 2017. During the quarter, the company stopped enrollment in the phase Ib study evaluating EC1456 for lung cancer as well as stop enrollment of taxane-naive metastatic castration-resistant prostate cancer patients for EC1169. The company now plans to focus on its most promising programs like CAR T-cell small-molecule drug conjugates (SMDC) adaptor platform, and its pipeline candidate EC2629. However, with no approved product in its portfolio at the moment, Endocyte has to depend heavily on its partners for top-line growth. Moreover, shares of the company have underperformed the industry year to date.”
Internationa Flavors & Fragrances (NYSE:IFF) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “In the last three months, International Flavors & Fragrances' shares have outperformed the industry. In second-quarter 2017, the company's recorded a positive earnings surprise of 4.2%. Compared with the year-ago quarter, adjusted earnings of $1.50 grew 2% year over year on the back of benefits from acquired assets, healthy segmental performance and lower shares outstanding. For 2017, the company anticipates net sales to grow 7.5-8.5% on a currency neutral basis while predicts earnings per share to increase 6.5-7.5%. The company anticipates gaining from its acquired businesses as well as from its multi-year productivity program, enabling it to check costs, make strategic investments and expand businesses globally. However, forex woes are predicted to negatively impact earnings per share by 2.5% and revenues by 1%. Also, the company is exposed to risks arising geopolitical issues and stiff competition.”
Infineon Technologies AG (NASDAQ:IFNNY) was downgraded by analysts at Zacks Investment Research from a strong-buy rating to a hold rating. According to Zacks, “Infineon's third-quarter fiscal 2017 results were impressive in terms of top-line growth, which demonstrated the company’s strong growth prospects in the automotive market (42% of total revenue). The company’s products are currently used by eight of the top-10 electric vehicle makers. Infineon holds a dominating position in the xEV power semiconductor market. Over the last three quarters, design wins almost doubled as compared with numbers in fiscal 2016. Moreover, the company’s focus on developing energy-efficient solutions is a key catalyst going ahead. We note that Infineon has outperformed the industry on a year-to-date basis. However, slowdown in smartphone sales can prove to be a major drag going forward. Additionally, the cyclical nature of the semiconductor industry, and price erosion is likely to be major headwinds going ahead.”
J.C. Penney Company, Inc. Holding (NYSE:JCP) was downgraded by analysts at Zacks Investment Research from a strong-buy rating to a hold rating. According to Zacks, “J. C. Penney Company shares which have underperformed the industry in the past one year were further battered after the company reported wider-than-expected second-quarter loss. Even the top line which not only surpassed the estimate for the first time after missing the same in the preceding five quarters but also increased year over year failed to cushion the stock. Nevertheless, in an effort to lure more customers and ramp up sales, management has introduced a new loyalty program. These along with remodeling, renovation and refurbishment of stores with special attention on enhancing the reach of national and especially private-label brands looks promising. J. C. Penney is also gradually increasing the count of Sephora stores which is going great business. However, the impact of challenging retail landscape, high-debt level, stiff competition from online retailers, and waning store traffic concerns linger.”
Merrimack Pharmaceuticals (NASDAQ:MACK) was downgraded by analysts at Zacks Investment Research from a hold rating to a sell rating. According to Zacks, “Merrimack reported a dismal second quarter with its top and bottom lines missing estimates.With the sale of Onivyde, Merrimack is back to being a development-stage biopharmaceutical company. The successful development of the three lead candidates in its pipeline is critical for Merrimack’s growth. Moreover, two of the candidates, MM-121 and MM-141, are still being evaluated in phase II studies. The third candidate, MM-310 entered phase I study in the first quarter of 2017. Also, shares of the company have underperformed the industry year to date. However, the cash received from Ipsen was used to pay down the huge debt and return value to shareholders in the form of dividends. Moreover, the company has also invested a part of the proceeds to develop its streamlined oncology pipeline.”
Microsemi Corporation (NASDAQ:MSCC) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “Microsemi Corporation is an OEM of a broad range of high-reliability and analog/mixed signal integrated circuits. third-quarter fiscal 2017 non-GAAP earnings beat the Zacks Consensus Estimate while revenues were in line with the same. The company's focus on improving product mix, operational efficiency, and consolidation are driving revenues and margins through 2017. Moreover, we have confidence in the company's strategic positioning, strong fundamentals and growth prospects. Microsemi's scope for margin expansion and decent balance sheet are the other positives. However, pockets of weakness related to product transition at medical customers, push-out of some communications spending in China and a softer oil & gas market continue to impact revenues. Over the last one year, the stock has underperformed the industry it belongs to.”
Nikon Corp (NASDAQ:NINOY) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “Nikon’s earnings for first-quarter fiscal 2018 declined significantly year over year, dragged by adverse product mix in Imaging Products and poor performance of the Semiconductor Lithography business. In the Instruments Business, the microscope-related field suffered, mainly due to delayed budget execution by the government. Over the past one year, Nikon’s shares have grossly underperformed the industry’s average return. However, Nikon is focusing on expansion in two new segments, namely Medical and Instruments business, which should stoke growth in the times to come. It is also undertaking a number of initiatives on stabilizing the key financials of its core business areas – including Precision Equipment and Imaging Products – to stoke growth. Nikon also anticipates strong capital investments in the semiconductor-related field, which will drive growth in the Precision Equipment Business, going forward.”
Office Depot (NASDAQ:ODP) was downgraded by analysts at Zacks Investment Research from a hold rating to a sell rating. According to Zacks, “Persistent weakness in the office products sector, stiff competition, loss of customers in Business Solutions Division and lower traffic count have been playing spoilsport for Office Depot. The company succumbed to a negative earnings surprise in second-quarter 2017, after three straight quarters of earnings beat, while sales also missed the Zacks Consensus Estimate for the 12th quarter in row. We note both the top and bottom lines declined year over year. Following the dismal show, the stock took a bearish path and has now underperformed the industry in the past one month. Nevertheless, Office Depot is concentrating on business operating model, growth prospects, cost structure, and omni-channel capabilities. Management anticipates total sales to be lower in 2017 versus 2016 due to store closures, tough market conditions and losses of contract customers in the prior year. However, the rate of decline is expected to decelerate sequentially.”
Verifone Systems (NYSE:PAY) was downgraded by analysts at Zacks Investment Research from a hold rating to a sell rating. According to Zacks, “VeriFone has underperformed the broader industry on a year-to-date basis. Based on the unimpressive second-quarter results and divestiture of three non-core businesses, the company lowered its fiscal 2017 guidance. Continued forex volatility along with increasing competition remain key areas of concern for the company. Nevertheless, we believe that the company's strong product portfolio that now includes the likes of Carbon 8 and Engage will help in expanding customer base in the long haul.”
Sina Corporation (NASDAQ:SINA) was downgraded by analysts at Zacks Investment Research from a hold rating to a strong sell rating. According to Zacks, “SINA Corp reported second quarter 2017 results wherein both earnings and revenues grew year over year. However, we believe that uncertainty over its advertising business and portal, which is preventing management from providing quarterly guidance, doesn't augur well for investors. Further, we believe that continuing investments in Weibo and other verticals like Internet finance, automobile and sports will hurt profitability, going forward. SINA’s monetization efforts may see regulatory pressure due to restrictions imposed by the Chinese government, which may hurt subscriber growth. The company is also seeing some headwinds in regards to obtaining new media rights for sports in China. Nevertheless, the growing popularity of Weibo and a robust mobile user base in China remain positives for the company.”
Transdigm Group (NYSE:TDG) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “TransDigm reported third-quarter fiscal 2017 adjusted earnings of $3.20 per share, beating the Zacks Consensus Estimate of $2.98 on the back of robust top-line performance and improvements in operating margin. TransDigm’s excellent business operation model, which implements value-based operating strategies guided by three value driver concepts, has helped the company drive operating margin expansion over the past few quarters. This apart, TransDigm’s strategic acquisitions has bolstered its aftermarket content. However, on the flip side, softening discretionary retrofits, interior retrofits and weaknesses in jet and helicopter markets have impacted the company’s top-line performance in recent times. Year-to-date shares have underperformed the industry’s average return over the past one year. TransDigm’s commercial transportation business is suffering from inventory management issues from OEM customers.”
West Fraser Timber Co. (TSE:WFT) was downgraded by analysts at BMO Capital Markets from an outperform rating to a market perform rating.
DENTSPLY SIRONA (NASDAQ:XRAY) was downgraded by analysts at Zacks Investment Research from a hold rating to a sell rating. According to Zacks, “DENTSPLY SIRONA's robust performance by its flagship dental implants, CAD/CAM systems, imaging systems, treatment centers and orthodontic product platforms hold considerable promise over the long haul. The company recently announced the renewal of an existing distribution agreement with Henry Schein Canada, Inc. The agreement is a smart move by DENTSPLY SIRONA as the preexisting distribution agreement did not include the CEREC CAD/CAM restoration system and the Schick line of imaging sensors. However higher capital expenditure on product development and tough competition are expected to put margins under pressure. Unfavorable foreign exchange rate and integration are the major risks in the near term. The price performance of the stock has been unfavorable over the last three months.”
