Make no mistake about it, yesterday was a bloodbath. After a day like that it’s easy to pick on stocks that have been beat down. With today’s Bear of the Day I’m not looking to pick on a stock just because it’s down. I’m looking to help you avoid an industry that’s had weakness in earnings revisions as well as an individual stock that has seen downward revisions as of late.
First I found a stock in the Building Products – Air and Heating industry which ranks in the bottom 7% of our Zacks Industry Rank. Granted the industry only contains four stocks, but none of them is above a Zacks Rank #3 (Hold). But today’s Bear is the only Zacks Rank #5 (Strong Sell) in the bunch.
Nortek (NTK) is a manufacturer of residential commercial building products primarily in the United States, Canada and Europe. It offers range hoods, bath fans, indoor air quality systems, heating and air conditioning systems, and technology offerings, including audio, video, access control, security and digital display mounting and mobility products. The company serves remodeling and replacement, residential and commercial new construction, manufactured housing and personal and enterprise computer markets. Nortek is based in Providence, Rhode Island.
Earnings estimates have been coming down recently. The most glaring revision that stands out is the current quarter estimate. Consensus has come down from $1.02 just 90 days ago all the way to 65 cents per share. This has also had an adverse effect on this year’s consensus, pulling it down from $2.94 to $2.05.
The recent trend of downward revisions just began recently. Our data shown in the price and consensus chart shows positive revisions from September 2013 through June 2014. Since then these numbers have started to come down along with Nortek’s stock price.
The technical picture for the stock hasn’t been much better either. After having a fantastic run up from the mid $60s in August and September of last year to a high near $92 in July of this year, NTK has begun a steady sell-off.
The first down leg took NTK shares down to $77, down nearly every day in July. After consolidating a bit in the high $70s, NTK tried to retrace its downturn. Unfortunately, NTK couldn’t leapfrog the $85 level. After several failed attempts NTK began to sell-off again during the second week of September.
Since then the drop took NTK all the way to a low of $73.24 on September 19th. That helped push the stochastics firmly into oversold territory and had Nortek trading well below its 40 day moving average. The 40 day currently sits at $80.77, well above the current stock price at $75.43.