Stock to Avoid: Blount International - Analyst Blog

Zacks Investment Research downgraded Blount International Inc. BLT to a Zacks Rank #5 (Strong Sell) on Mar 8, 2014. Going by the Zacks model, the companies holding a Zacks Rank #5 have strong chances of performing worse than the broader market. Hence, investors seeking exposure in machinery industry are advised to avoid investing in or to sell their existing holdings in Blount International.

Why the Downgrade?

Market sentiments have been weak since Blount International revised its guidance for 2013 and provided its outlook for 2014 on Feb 10, 2014. Since then, the share price of the company has fallen 1.4% while it provided a negative year-to-date return of 11.5%. A snapshot of the revised guidance is provided below:

Revenues are expected to be roughly $901 million lower than the earlier-expected range of $905–$915 million. The revised guidance reflects a year-over-year decrease of 3%. Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) are expected to be $125 million, down from both 2013 earnings of $136 million and the previous guidance of $310 million.

For 2014, Blount International anticipates revenues to be within a range of $925–$950 million and adjusted EBITDA to be within a range of $130–$135 million. Sales growth in the Forestry, Lawn and Garden segment is expected to be 4% while in the Farm, Ranch and Agriculture segment, sales growth is predicted to be roughly 8%. Free cash flow is expected to be $35 million and capital spending to be roughly $45 million.
 
In the last 60 days, the Zacks Consensus Estimate for Blount International decreased 18.2% to 81 cents for 2014. This, along with the negative average earnings surprise of 13.7% for the trailing quarters, raises concern over the company's performance in the quarters ahead.

Other Stocks to Consider

Blount International is a $613 million company manufacturing and marketing tools for forestry, lawn and garden, farm, ranch, agriculture and construction sectors. Some better-ranked stocks in the machinery industry include Kadant Inc. KAI, Sun Hydraulics Corp. SNHY and Altra Industrial Motion Corp. AIMC. While Kadant and Sun Hydraulics hold a Zacks Rank #1 (Strong Buy), Altra Industrial Motion carries a Zacks Rank #2 (Buy).