Blount International Down to Strong Sell - Analyst Blog

Zacks Investment Research downgraded Blount International Inc. (BLT) to a Zacks Rank #5 (Strong sell) on May 8, 2013.

Why the Downgrade?

Blount International reported lackluster financial results for the first quarter 2013 on May 7, 2013. Since then, the company's share price has gone down 1.4%. Earnings per share came in at 19 cents, up 58.3% year over year but 17.4% below the Zacks Consensus Estimate of 23 cents.

Sales at $232.6 million represented a 3% hike over the year-ago quarter as the segments including Forestry, Lawn and Garden reported revenue increase of 2.2% while Farm, Ranch, and Agriculture posted a 4.6% increase.

Talking of costs/margins of Blount International, cost of sales in the quarter rose 3.6% year over leading to roughly a 70 basis point decline in gross profit. Income tax expenses were a drag on the results as it grew by roughly 92.1%.

For 2013, foreign currency headwind is expected to range within $2-$3 million; interest expense is predicted to be within $18-$19 million and tax rate to be within the 35%-38% range.

After taking all these factors into account, earnings estimate for Blount International came down in the last 7 days. The Zacks Consensus Estimate for 2013 decreased by 1.9% to $1.02 while for 2014, the estimate went down by 1.5% to $1.32.

Also, two quarters of each negative earnings surprise and in-line results have led to an overall negative earnings surprise of 19.6% in the last trailing four quarters. Currently, for the second quarter 2013 of Blount International, we have an Earnings ESP (Read: Zacks Earnings ESP: A Better Method) of -7.7%.

Other Stocks to Consider

Blount International is a $697 million company manufacturing and marketing tools for forestry, lawn and garden, farm, ranch, agriculture, and construction sectors. Other stocks to watch out for in the industry are Tri-Tech Holding, Inc. (TRIT) and Graco Inc. (GGG), each holding a Zacks Rank #1 (Strong Buy) while Middleby Corp. (MIDD), has a Zacks Rank #2 (Buy).