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Park Electrochemical (PKE) recently reported its third straight earnings miss thanks in large part to a 6% decline in net sales. Analysts revised their estimates meaningfully lower for both 2014 and 2015 following the company's most recent earnings miss on June 26. This sent the stock to a Zacks Rank No. 5 (Strong Sell) stock. Despite this, shares currently trade at a premium on a forward P/E basis. Investors may want to avoid PKE until its earnings momentum turns around.

Park Electrochemical Corp. manufactures high-technology digital and RF/microwave printed circuit materials primarily for the telecommunications and Internet infrastructure and high-end computing markets and advanced composite materials, parts, and assemblies for the aerospace markets. Sales of printed circuit materials products account for approximately 85% of its total revenue.

First-Quarter Results

Park Electrochemical reported somewhat disappointing first quarter fiscal 2014 results on June 26. Earnings per share came in at 25 cents, missing the Zacks Consensus Estimate by 4 cents. It was the company's third straight earnings miss.

The company continued to post lethargic top-line results. Net sales declined 6% to $43.4 million, which was well below the consensus of $47.0 million. Despite this, the operating profit margin expanded a solid 190 basis points, which led to a 4% increase in net income.

Estimates Fall

Following the Q1 earnings miss, analysts revised their estimates meaningfully lower for both 2014 and 2015. This sent the stock to a Zacks Rank No. 5 (Strong Sell).

The Zacks Consensus Estimate for 2014 is now $1.17, down from $1.26 before the Q1 release. The 2015 consensus is currently $1.25, down from $1.38 over the same period. This continues the trend of negative earnings revisions over the last several months, as you can see in the company's Price and Consensus chart:

Premium Valuation

Despite the negative earnings momentum, shares of Park Electrochemical are still trading at a premium valuation on a forward P/E basis. Its 12-month forward P/E ratio of 21 is well above the industry median of 16x and its 10-year historical median of 18x. Investors with a short-term time horizon that are still interested in the Electronics-Miscellaneous Components industry may want to consider Nidec Corp. (NJ) or Stoneridge (SRI) instead, which are both Zacks Rank No. 1 (Strong Buy) stocks.

The Bottom Line

With a string of negative earnings surprises, falling earnings estimates, and premium valuation, investors should consider avoiding this Zacks Rank No. 5 (Strong Sell) stock until its earnings momentum turns around.

Nidec Corp.: Free Stock Analysis Report (email registration required)

Park Electrochemical: Free Stock Analysis Report (email registration required)

Stoneridge: Free Stock Analysis Report (email registration required)

Source: Bear Of The Day: Park Electrochemical