The firm said it lowered its rating on the diversified metals processing company as it believes Worthington is facing execution issues relating to its recent acquisitions.
Shares of Worthington Industries are flat in pre-market trading this morning.
"Execution troubles have served to sizably reduce near-term margin momentum and our near-term EPS growth forecasts, and will likely act as an impediment to valuation and risk-reward until resolved," Keybanc said.
Separately, TheStreet Ratings team rates WORTHINGTON INDUSTRIES as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate WORTHINGTON INDUSTRIES (WOR) 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 robust revenue growth, largely solid financial position with reasonable debt levels by most measures and notable return on equity. 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 revenue growth came in higher than the industry average of 3.5%. Since the same quarter one year prior, revenues rose by 24.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- WORTHINGTON INDUSTRIES's earnings per share declined by 17.1% 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, WORTHINGTON INDUSTRIES increased its bottom line by earning $2.12 versus $1.92 in the prior year. This year, the market expects an improvement in earnings ($2.75 versus $2.12).
- WOR's debt-to-equity ratio of 0.77 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.99 is weak.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Metals & Mining industry and the overall market, WORTHINGTON INDUSTRIES's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, WOR has underperformed the S&P 500 Index, declining 9.81% from its price level of one year ago. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
- You can view the full analysis from the report here: WOR Ratings Report