Crawford Slips to Sell on Downward Estimate Revisions - Analyst Blog

On Aug 27, 2014, Zacks Investment Research downgraded Crawford & Company (CRD.B) to a Zacks Rank #4 (Sell).

Why the Downgrade?

Crawford has witnessed sharp downward estimate revisions after reporting disappointing second-quarter 2014 results. The Zacks Consensus Estimate for 2014 decreased 1.2% to 82 cents per share over the last 30 days. This also translates into a year-over-year decline of 12.2%.

On Aug 4, Crawford reported second-quarter earnings per share of 19 cents, missing the Zacks Consensus Estimate by 9.52% and the year-ago earnings by 36.7%. The top line also missed the Zacks Consensus Estimate and declined year over year. Decline in operating earnings is attributable to the expenses associated with Gulf-related special project in Legal Settlement Administration. This project's class action settlement and Thailand flooding claims have adversely affected the company's revenues in recent periods.

Further, the financial position of Crawford was weak at the end of the second quarter of 2014, affected by a decline in cash and cash equivalents from 2013-end and a year-over-year increase in cash outflow. In the wake of these weaknesses, the approval of a new share repurchase authorization and a hike in quarterly dividends does not appear praiseworthy.

We remain doubtful about the execution of these capital management initiatives based on the weak financial position. Such increased spending might also prompt Crawford to procure debts thereby, increasing the already high financial leverage.

Other Stocks to Consider

Not all business services stocks are performing as poorly as Crawford. Better-ranked stocks in the same sector include Avis Budget Group, Inc. (CAR), Iron Mountain Inc. (IRM) and WNS (Holdings) Ltd. (WNS). All these stocks sport a Zacks Rank #1 (Strong Buy).