We've downgraded Perini (PCR), which offers general contracting, construction management, and design-build services to private clients and public agencies worldwide, from hold to sell, driven by its deteriorating net income, disappointing return on equity, poor profit margins, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.
Net income decreased from $22.9 million in the same quarter last year to -$163 million, significantly underperforming the S&P 500 and the construction and engineering industry. ROE also greatly decreased a signal of major weakness. Perini's 6.9% gross profit margin is extremely low, though it has increased since the same period last year. The -10.2% net profit margin significantly underperformed the industry average. EPS declined by 496.4% since the same quarter last year, though the consensus estimate suggests that the company's two-year trend of declining EPS should reverse in the coming year.
Shares have tumbled by 57.4% over the year, underperforming the S&P 500. Naturally, the overall market trend is bound to be a significant factor, and in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
We've downgraded print services provider R.R. Donnelley & Sons (RRD) from hold to sell, driven by its deteriorating net income, generally weak debt management, disappointing return on equity, poor profit margins and weak operating cash flow.Net income fell to -$686.9 million in the most recent quarter from -$293.3 million in the year-ago quarter, significantly underperforming the S&P 500 and the commercial services and supplies industry. RRD's 1.8 debt-to-equity ratio is quite high overall and compared with the industry average, and its quick ratio of 1 illustrates its inability to avoid short-term cash problems. ROE is lower than it was in the year-ago quarter, a clear sign of weakness. RRD's 24% gross profit margin is rather low, having decreased from the same quarter a year ago, and its net profit margin of 24.6% is significantly below the industry average. Net operating cash flow has decreased by 17.2% to $326.3 since the year-ago quarter. Other ratings changes included First Service (FSRV)and Tween Brands (TWB), both downgraded from hold to sell. All ratings changes generated on Feb. 26 are listed below.
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