Zacks Investment Research downgraded Orion Engineered Carbons SA OEC to a Zacks Rank #5 (Strong Sell) on Dec 5, 2015. Going by the Zacks model, companies holding a Zacks Rank #5 have strong chances of underperforming the broader market over the next few quarters.

Why the Downgrade?

Market sentiments have been weak for Orion Engineered Carbons since the beginning of 2015, as evident from a negative year-to-date return of 24.9%. The stock’s financial performance in the last four quarters was lackluster, with an average negative earnings surprise of 34.5%. We have briefly discussed the company’s last-quarter performance below.

Orion Engineered Carbons’ earnings of 35 cents per share came in line with the Zacks Consensus Estimate. The top-line performance was weak as revenues declined 15.5% year over year due to negative impact of product mix and sales price decline. On a segmental basis, revenues from Specialty Carbon Black segment fell 5.4% year over year, while that from Rubber Carbon Black decreased 20%.

Disappointing results have made investors skeptical regarding Orion Engineered Carbons’ prospects. Over the last 60 days, the Zacks Consensus Estimate for the stock has decreased 2.9% to $1.33 per share for 2015 and 7.9% to $1.40 for 2016. Also, Earnings ESP for the stock stands at -6.77% for 2015 and -27.14% for 2016; while the same is pegged at -20.83% for fourth-quarter 2015.

Stocks to Consider

Orion Engineered Carbons currently has a market capitalization of $744 million. Better-ranked stocks in the chemical diversified industry include Celanese Corporation CE, Innospec Inc. IOSP and Cytec Industries Inc. CYT. While Celanese Corporation and Innospec sport a Zacks Rank #1 (Strong Buy), Cytec Industries carries a Zacks Rank #2 (Buy).

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