Research Analysts’ Downgrades for September, 12th (AFG, AIT, AME, ANTM, ARW, AXP, CLI, DNB, DUK, ED)

Research Analysts’ downgrades for Tuesday, September 12th:

American Financial Group (NYSE:AFG) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “Shares of American Financial have outperformed the industry year to date. The company is well poised to benefit from impressive inorganic growth and restructuring initiatives. Better industry fundamentals, with strong pricing and a higher renewal ratio, should drive overall growth. Consistent price increase in property and casualty business, combined ratio that compares favorably with industry average, a strong balance sheet, low leverage cost, and disciplined capital management are positives. Based on strong operational performance, it raised core net operating earnings of $6.40–$6.90 per share in 2017. Estimates for 2017 and 2018 also moved north over the last 60 days.  However, American Financial’s exposure to cat loss is a risk to underwriting results. A still soft interest rate environment is expected to weigh on desired upside in investment results.”

Applied Industrial Technologies (NYSE:AIT) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “Over the last month, Applied Industrial’s shares outperformed the industry. The company believes that robust upstream business, sturdy performance of the U.S. fluid power business, and superior customer servicing skills will likely bolster its top-line performance in the quarters ahead. Moreover, sound restructuring moves, greater productivity and increased cost discipline are projected to strengthen the company’s near-term bottom-line performances. However, the company perceives that a stronger U.S. dollar might continue to hurt its overseas market revenues in the quarters ahead. Even so, other headwinds such as increasing industry rivalry or consolidation among consumers or suppliers, might curtail near-term growth. Over the last 30 days, Zacks Consensus Estimate for the stock moved north for fiscal 2018 but remained unchanged for fiscal 2019.”

AMTEK (NYSE:AME) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “AMETEK is a leading manufacturer of electronic appliances and electromechanical devices. The company posted better-than-expected second-quarter 2017 results surpassing the Zacks Consensus Estimate on earnings and revenues. AMETEK continues to reap the benefits from the execution of its four core growth strategies of operational excellence, global market expansion, investments in product development and strategic acquisitions. This, in combination with a strong portfolio of differentiated businesses, is expected to help the company post better results, going forward. However, weakness in its balance sheet and integration issues and an overly high goodwill associated with an aggressive acquisition strategy are concerns. Foreign exchange headwinds remain. Year to date, the stock has underperformed the  industry it belongs to.”

Anthem (NYSE:ANTM) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “Anthem’s shares have outperformed the industry in last one year. The company’s diverse product portfolio has helped in improving underwriting results. Anthem’s strategic acquisitions, divestitures and ACO arrangements further pave the way for long-term growth. Its rising level of medical membership continues to boost the top line. The company’s strong capital position backs effective capital deployment. Its frequent share buyback programs and regular dividend payments primarily aim at enhancing shareholders’ value. The company has seen the Zacks Consensus Estimate for 2017 and 2018 earnings being revised upward over the last 60 days. Followed by strong results in first half of 2017, the company has raised the earnings and revenue guidance for 2017. However, weak public exchange business remains a major area of concern. Also, rising level of debt continues to weigh on margins.”

Arrow Electronics (NYSE:ARW) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “Estimates for Electronic component distributor, Arrow Electronics have not moved around much of late. Shares of the company have outperformed the industry over the last one year. Original equipment manufacturers, contract manufacturers and commercial customers are selecting Arrow’s strong distribution channels for marketing their products, which is driving its revenues. We believe that the company’s core strength in providing best-in-class services and easy-to-acquire technologies should drive growth in the long run. Moreover, the company has secured a significant market share through a broad portfolio of products and services, and continued efforts to maximize consumer satisfaction. Additionally, incremental sales from strategic acquisitions are expected to boost the top line. However, an uncertain economic environment, high debt burden and competition remain the concerns.”

American Express (NYSE:AXP) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “The stock of American Express has outperformed the industry in last one year. The company is gaining from investments made in growth opportunities over the last couple of years. A solid market position, strength in card business and significant opportunities from the secular shift toward electronic payments are growth drivers. Strategic initiatives focusing on the platinum card portfolio and OptBlue program will drive business volume. Cost reduction and return of significant capital to shareholders through dividend and share buyback are other positives. The stock has seen the Zacks Consensus Estimate for current-year earnings being revised 0.5% upward over the last 60 days. However, an increase in provision for losses, a strong U.S. dollar, loss of Costco as a client and intense competition remain major near-term concerns.”

Mack-Cali Realty Corporation (NYSE:CLI) was downgraded by analysts at Zacks Investment Research from a hold rating to a sell rating. According to Zacks, “Shares of Mack-Cali have underperformed its industry, year to date. Moreover, the stock has seen the Zacks Consensus Estimate for current-year funds from operations (FFO) per share being revised downward in a month’s time. Notably, the company’s second-quarter 2017 core FFO per share missed the Zacks Consensus Estimate by a penny. Also, the company lowered its guidance for full-year 2017, mainly due to lower leasing starts. The company has been making solid strides in its 20/15 strategic plan, which is aimed at transforming the company by focusing on waterfront and transit-based office holdings, and on luxury multi-family portfolio growth. It also includes planned exits from non-core markets and capital improvements in core assets. Such efforts have the capacity to drive growth and improve cash flow in the long run. However, the earnings-dilutive effects of disposition in the near term remain headwinds. Rate hikes add to its woes.”

Dun & Bradstreet Corporation (The) (NYSE:DNB) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “We continue to expect that Dun & Bradstreet will benefit from its high-margin business model and strong product portfolio. Its partnerships with big players have also helped it bring many more customers into the fold. Plus, the company is also well-positioned to gain from its strategic acquisitions and alliances. The company’s focus on expanding analytics capabilities is also a positive. Plus, cost savings resulted in a strong operating margin performance in the last reported quarter. Management has now raised the lower end of its operating margin growth for the year. However, stiff competition, weak DNBi business and high debt continue to remain areas of concerns. Shares have underperformed the broader market in the past one year.”

Duke Energy Corporation (NYSE:DUK) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “Duke Energy’s hefty investment plans for the next five years is expected to improve its business by generating cleaner energy and bolstering its renewable asset base, buoys optimism. Moreover, over the next 10 years, Duke Energy plans to strengthen its energy delivery system by investing $25 billion to create a more modern, smarter energy grid. The company has also been pursuing additional generation projects, such as dual-fuel capabilities, and combined heat and power facilities to increase the flexibility of its system. Duke Energy also pursues a systematic asset divestment initiative. Moreover, it outperformed the broader industry in the last year. Yet, potential volatility in market prices of fuel, electricity and other renewable energy commodities could create operational risks for the company. In addition, adverse outcome from pending regulatory cases may negatively impact Duke Energy’s earnings.”

Consolidated Edison (NYSE:ED) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “Consolidated Edison has a history of favorable rate decisions by regulatory authorities, which will likely encourage it to invest more in infrastructure improvements. A stable financial position backed by a strong cash generation capacity enables the company to follow a disciplined capital spending program. The company is also making notable progress in generating renewable energy. Moreover, the company outperformed its broader industry in the past one year. However, disruption in wholesale energy markets may affect its ability to meet customers’ energy needs and thereby adversely affect its performance.”

FirstEnergy Corporation (NYSE:FE) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “Shares of FirstEnergy have gained higher than the industry in last three months. FirstEnergy’s modernization drive and new generation asset additions have led to its ambitious “Energizing the Future” plan aimed at upgrading and expanding its transmission capabilities. FirstEnergy is also gaining from industrial load growth. The company is working to transform itself into a regulated company by mid of 2018. It has secured regulatory approvals for base rate increase in Pennsylvania, New Jersey and Ohio which are expected to boost its top line in 2017. However, FirstEnergy’s higher debt/capital ratio compared with peers may further drive up its cost of capital in the rising interest rate environment. High competition in the wholesale and retail electric markets can affect its top line. In addition, stringent regulatory norms, mild weather and intensifying competition are some of the headwinds.”

Fomento Economico Mexicano S.A.B. de C.V. (NYSE:FMX) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “FEMSA outperformed the broader industry in the year so far. The company is on track to drive growth through strategic measures, including increasing store count, diversifying business portfolio and focusing on core business activities. Further, its exposure in various industries including beverage, beer and retail, gives it an edge over competitors. Also, FEMSA's strong cash flow generation capacity enables it to make incremental investments in business expansion. However, second-quarter 2017 results marked its fourth consecutive earnings miss, while sales lagged estimates for the second straight time. Moreover, the company continued to witness margin pressures due to decline in margins at Coca-Cola FEMSA and lower-margin businesses growth at FEMSA Comercio, as well as higher operating expenses at Coca-Cola FEMSA and FEMSA Comercio’s Health division. Nevertheless, FEMSA's focus on achieving growth via acquisitions bode well.”

Gerdau (NYSE:GGB) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “Year to date, Gerdau's American Depository Receipts (ADR) have outperformed the industry. We believe that the company's product portfolio, manufacturing techniques and international diversity will help it grow over the long term. Also, its strategy of disposing loss-making assets/businesses will enable it to focus on the profitable ones. Going forward, any investment by the government in infrastructure improvements will boost steel demand in Brazil, thereby creating favorable conditions for the company. However, it is exposed to risks arising from higher raw material costs, foreign currency fluctuations, huge debt levels and cyclical nature of the industry. In second-quarter 2017, the company's adjusted net income declined 19.1% year over year due to 10.6% fall in revenues, forex woes and higher income tax expenses. Also, the stock is currently overvalued compared with the industry.”

Gol Linhas Aereas Inteligentes (NYSE:GOL) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “Shares of GOL Linhas have outperformed its industry in the last six months. The company is benefitting from the improvement in the Latin American economy. The carrier's view for full-year 2017 is impressive. The carrier's efforts to reduce debt levels are also encouraging. GOL Linhas has been undergoing a thorough restructuring process to revive itself. We expect the company’s focus on capacity discipline to result in improvement in yields, going forward. However, increasing expenses on aircraft fuel continue to limit bottom-line growth. Soft international traffic is another challenge for the company to overcome. The decrease in July load factor also raises concerns. Moreover, GOL is highly dependent on the products of certain big suppliers.”

International Consolidated Airlines Group SA (OTC:ICAGY) was downgraded by analysts at Morgan Stanley from an overweight rating to an equal weight rating.

Itron (NASDAQ:ITRI) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “Itron’s sales guidance range of 2017 depicts a year over year growth of 1.6% at the midpoint, reflecting sound business performance and the addition of distributed energy management solutions to its platform. The company continues to focus on expanding portfolio of outcome-based solutions, utilizing the power of the OpenWay Riva platform. Its restructuring projects will help in reducing costs and boost manufacturing flexibility. Moreover, the Comverge buyout, strong bookings and backlog, and new projects will drive growth. Itron's estimates have been undergoing positive revisions lately. The company has a positive record of earnings surprises in recent quarters. However, Itron‘s liquidity could be affected by the stability of electricity, gas, and water industries and competitive pressures. Elevated expenses and fluctuation in currency rates may mar income in the near term. The stock underperformed the industry over the past year.”

John Wiley & Sons (NYSE:JW.A) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “John Wiley & Sons, which has outpaced the industry in the past six months, is metamorphosing in to a more digital-service oriented company. Moreover, it is focusing on building a more favorable product mix as digital services/products generate higher margins and are likely to offset the waning print revenue. Recently, the company reported solid first-quarter fiscal 2018 results, wherein both the top and bottom line improved year over year and also beat the Zacks Consensus Estimate. Results were primarily driven by gains from Atypon’s buyout. Further, strength in the Research and Solutions divisions compensated for the softness in the Publishing division that stemmed from lower print book sales. In fiscal 2018, management continues to envision adjusted earnings at constant currency to decline by low-single digits. Both revenues and operating income is anticipated to be nearly flat year over year.”

Lundin Petroleum AB (STO:LUPE) was downgraded by analysts at Citigroup Inc. from a neutral rating to a sell rating.

Monsanto (NYSE:MON) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “Over the last twelve months, Monsanto’s shares outperformed the industry. The company reported better-than-expected third-quarter fiscal 2017 results. Increasing demand for crop-yield enhancing products, stronger innovation and success of Bayer’s buyout deal are anticipated to bolster Monsanto’s top- and bottom-line performance in the quarters ahead. However, challenging pricing conditions prevailing in the agricultural market might limit near-term growth. In addition, headwinds like weaker currencies of major overseas markets, such as Brazil, or stiff industry rivalry remain major causes of worry. Over the last 30 days, Zacks Consensus Estimate for the stock has remained unchanged for fiscal 2018.”

Northrop Grumman Corporation (NYSE:NOC) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “As one of the top largest U.S. defense contractors, Northrop continues to enjoy strong presence in Air Force, Space & Cyber Security programs. Moreover, its product innovation and focus on strengthening its ISR wing will help maintain a stable earnings stream amid the rapidly changing needs of the defense landscape. The company maintains a strong balance sheet and steady cash flow that offer substantial financial flexibility. With rising demand for arsenals across the globe, foreign military sales continue to be a major growth driver for Northrop. However, challenging economic and political factors have been raising concerns. Moreover, too much dependence on fixed-price contracts remains a concern for the stock. Also the stock underperformed the broader industry in the last one year.”

PNC Financial Services Group, Inc. (The) (NYSE:PNC) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “Shares of PNC Financial have outperformed the industry, so far, this year. The performance was supported by the company’s impressive earnings surprise history. It hasn’t missed the Zacks Consensus Estimate for earnings in any of the trailing four quarters. The company benefits from robust organic growth and strong balance sheet position. Further, we remain encouraged by the company’s efforts to generate positive operating leverage through its cost-saving initiatives. Its deal to acquire the commercial and vendor finance business of ECN Capital is anticipated to be marginally accretive to earnings in 2017. However, the company’s capital deployment activities do not seem sustainable. Also, a stretched valuation reflects limited upside potential.”

PVH Corp. (NYSE:PVH) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “PVH Corp. has outperformed the industry year to date driven by its superb earnings history and brand strength. The company posted better-than-expected earnings and sales results for second-quarter fiscal 2017. While sales marked its fourth consecutive beat, earnings retained its positive surprise trend for the 13th straight time. Results continued to gain from solid momentum at its Calvin Klein and Tommy Hilfiger brands, particularly in the international regions. Further, the company raised earnings outlook for fiscal 2017. However, concerns regarding the volatile macroeconomic and geopolitical environment remain. While currency rates improved in second quarter, currency headwinds are expected to hurt fiscal 2017 earnings by 20 cents per share. Apart from this, a volatile retail scenario and greater marketing costs may hurt performance. Nonetheless, the company’s efforts to keep pace with the evolving consumer trends bode well.”

Richmont Mines (TSE:RIC) (ARCA:RIC) was downgraded by analysts at Scotiabank from an outperform rating to a tender rating. They currently have C$12.25 target price on the stock.

Richmont Mines (TSE:RIC) (ARCA:RIC) was downgraded by analysts at TD Securities from a buy rating to a tender rating. TD Securities currently has C$14.20 target price on the stock, down from their previous target price of C$15.50.

S&P Global (NYSE:SPGI) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “S&P Global’s strategic portfolio restructuring initiatives and focus on core business are likely to drive future growth. The company’s Standard & Poor's Ratings Services appears to be a long-term growth driver as corporate and U.S. structured finance issuance is picking up momentum with increasing capital infusion in the economy as well as positive growth in M&A activity. This apart, strategic acquisitions and positive industry trends augur well for long-term growth. The company outperformed the industry year to date. However, its performance is likely to be hurt by lower volume of debt securities issued in the capital markets. Financial distress could either dent investor’s demand for debt securities or make issuers reluctant to issue such securities. Various lawsuits have also hampered the credibility of the company and adversely impacted its financial results.”

TE Connectivity (NYSE:TEL) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “TE Connectivity has a striking earnings surprise history over the four trailing quarters, beating estimates all through. Strong progress on strategic priorities, solid execution and impressive top-line growth are proving conducive to the company’s profitability. It expects transportation business to experience high-single-digit organic growth, fueled by rise in global auto production and impressive heavy truck business in key end markets. Also, its Communications and Industrial segments are witnessing strong rebound, thus stoking growth. However, sluggish industrial markets and derivative impact of lower oil prices are posing as major headwinds, thwarting growth. Also, adverse currency fluctuations and high restructuring expenses might hurt the company’s performance. The stock has also underperformed the industry average, year to date. The company is currently experiencing inefficiencies in its supply chain.”

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