10 Stocks With Recent Negative EPS Surprises And Broker Downgrades

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 |  Includes: AON, DNDN, FCN, FSLR, GSK, JASO, KMI, LDK, MLM, MTN, PSSI, RDEA, VMC, XOM
by: Vytautas Drumelis

I ran a screen for potentially overvalued stocks which recently have failed to meet analyst estimates and have been downgraded by the brokers in the last week. These are a few interesting stocks to watch and potentially hedge your long positions with.

This list is a quick list only which requires further research into each of the stocks before making an investment decision. But I believe it can give some food for thought if you are looking for stocks to short.

1) El Paso Corp. (EP) operates in the natural gas transmission, and exploration and production sectors of the energy industry primarily in the United States. It offers natural gas transmission services to a range of customers, including natural gas distribution and industrial companies, electric generation companies, natural gas producers, other natural gas pipelines, and natural gas marketing and trading companies through approximately 44,200 miles of pipeline system.

It reported $0.20 EPS in March 2012 and failed to meet average analyst estimates of $0.29 (31% negative surprise). On 8th of May, 2012, it was downgraded from Neutral to Underweight by Atlantic Equities.

It's biggest direct competitor, Exxon Mobil Corporation (NYSE:XOM), also failed to meet analyst estimates in 1st quarter (March 2012), reporting $2.00 vs. $2.09 EPS estimated.

2) Aon Corporation (AON) provides risk management services, insurance and reinsurance brokerage, and human resource consulting and outsourcing services primarily in the United States, the Americas, the United Kingdom, Europe, the Middle East, Africa, and the Asia Pacific.

It reported $0.98 EPS in March 2012 and failed to reach average analyst estimates of $1.06 (7.5% negative surprise). On 10th of May, 2012, it was downgraded from Strong Buy to Hold by Macquarie Capital Markets Canada.

3) Martin Marietta Materials Inc. (MLM) together with its subsidiaries, engages in the production and sale of aggregates for the construction industry primarily in the United States, Canada, the Bahamas, and the Caribbean Islands.

It reported ($0.45) loss per share in March 2012 and failed to reach average analyst estimates of ($0.24) loss per share. On 10th of May, 2012, it was downgraded from Outperform to Sector Perform by RBC Capital. In terms of P/E multiples BTE looks overvalued (31.06) compared to industry (3.23) and sector (10.24).

It's biggest competitor, Vulcan Materials Company (NYSE:VMC), also reported negative EPS in the first quarter of 2012 ($0.42 loss per share) but exceeded analyst estimates ($0.44 loss per share).

4) Human Genome Sciences, Inc. (HGSI) operates as a biopharmaceutical company in the United States. Its principal products include BENLYSTA for systemic lupus erythematosus; and raxibacumab for inhalation anthrax.

It reported ($0.47) loss per share in March 2012 and failed to reach average analyst estimates of ($0.39) loss per share. On 10th of May, 2012, it was downgraded from Strong Buy to Hold by Leerink Swann & Co.

5) Vail Resorts, Inc. (MTN), through its subsidiaries, engages in the operation of resorts in the United States. The company operates in three segments: Mountain, Lodging, and Real Estate. The Mountain segment operates six ski resort properties, including Vail Mountain, Breckenridge Ski Resort, Keystone Resort, Heavenly Mountain Resort, Beaver Creek Resort, and Northstar-at-Tahoe Resort.

It reported $1.27 EPS in January 2012 and failed to reach average analyst estimates of $1.44 (11.8% negative surprise). On 10th of May, 2012, it was downgraded from Outperform to Market Perform by Wells Fargo.

6) First Solar, Inc. (NASDAQ:FSLR) engages in the design, manufacture, and sale of solar modules using a thin-film semiconductor technology in the United States and internationally. The company is also involved in the design, construction, and sale of photovoltaic solar power systems. Its solar modules employ a thin layer of semiconductor material to convert sunlight into electricity.

It reported ($0.08) loss per share in March 2012 and failed to reach average analyst estimates of $0.59 earnings per share. On 7th of May, 2012, it was downgraded from Buy to Hold by Argus Research.

It's competitors JA Solar Holdings Co., Ltd. (NASDAQ:JASO) and LDK Solar Co., Ltd. (NYSE:LDK) also reported worse than expected results in Q1 2012.

7) Dendreon Corporation (DNDN), a biotechnology company, engages in the discovery, development, and commercialization of novel therapeutics to enhance cancer treatment options for patients. The company’s product portfolio includes active cellular immunotherapy and small molecule product candidates to treat a range of cancers.

It reported ($0.70) loss per share in March 2012 and failed to reach average analyst estimates of ($0.63) loss per share. On 8th of May, 2012, it was downgraded from Strong Buy to Hold by Leerink Swann & Co.

8) FTI Consulting, Inc. (FCN) operates as a business advisory company worldwide. The company operates in five segments; Corporate Finance/Restructuring, Forensic and Litigation Consulting, Economic Consulting, Technology, and Strategic Communications.

It reported $0.61 EPS in March 2012 and failed to reach average analyst estimates of $0.43 (29.5% negative surprise). On 11th of May, 2012, it was downgraded from Outperform to Market Perform by Northland Securities.

9) Ardea Biosciences, Inc. (RDEA), a biotechnology company, focuses on the discovery and development of small-molecule therapeutics for the treatment of gout and cancer in the United States.

It reported ($1.25) loss per share in March 2012 and failed to reach average analyst estimates of ($0.98) loss per share. On 11th of May, 2012, it was downgraded from Buy to Neutral by UBS. The company has missed the analyst estimates in the last five quarters.

10) PSS World Medical, Inc. (PSSI) distributes medical products and equipments, pharmaceutical products, healthcare information technology, physician dispensing solutions, and professional services to alternate-site healthcare providers in the United States.

It reported $0.38 EPS in March 2012 and failed to reach average analyst estimates of $0.43 (11.6% negative surprise). On 11th of May, 2012, it was downgraded from Outperform to Market Perform by Northland Securities.

Financial data, competitor list and business descriptions taken from Yahoo Finance.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.