Will This Downgrade Hurt Valmont Industries (VMI) Stock On Wednesday?

NEW YORK (TheStreet) -- Valmont Industries Inc. (VMI) was downgraded to "neutral" from "outperform" and its price target was cut to $157 from $167 at Wedbush Securities this morning.

The firm said it lowered its rating on the global producer of fabricated metal products based on the company's low near-term visibility and its new guidance.

Valmont issued updated guidance for fiscal 2014 to include earnings between $9.35 and $9.65 per diluted share, compared to its prior estimate between $10 and $10.50 per diluted share.

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Separately, TheStreet Ratings team rates VALMONT INDUSTRIES INC as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

"We rate VALMONT INDUSTRIES INC (VMI) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The current debt-to-equity ratio, 0.31, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, VMI has a quick ratio of 2.30, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • VALMONT INDUSTRIES INC's earnings per share declined by 28.0% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, VALMONT INDUSTRIES INC increased its bottom line by earning $10.36 versus $8.75 in the prior year. This year, the market expects an improvement in earnings ($10.41 versus $10.36).
  • VMI, with its decline in revenue, slightly underperformed the industry average of 6.5%. Since the same quarter one year prior, revenues slightly dropped by 8.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • You can view the full analysis from the report here: VMI Ratings Report
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