This company has been shrinking for the last 18 months and guided for even more shrinkage. Investors like to buy companies that are growing rather than cutting off appendages in order to stop the bleeding.
NEW BULLISH Plays
No New Bullish Plays
NEW BEARISH Plays
FNSR - Finisar - Company Profile
SPX Corporation supplies infrastructure equipment serving the heating and ventilation (HVAC), detection and measurement, power transmission and generation, and industrial markets in the United States, China, South Africa, the United Kingdom, and internationally. It operates through three segments: HVAC, Detection and Measurement, and Engineered Solutions. The HVAC segment engineers, designs, manufactures, installs, and services cooling products for the HVAC and industrial markets, as well as boilers, comfort heating, and ventilation products for the residential and commercial markets. The Detection and Measurement segment offers underground pipe and cable locators, and inspection equipment, as well as bus fare collection systems, communication technologies, and specialty lighting products. The Engineered Solutions segment provides transformers for the power transmission and distribution markets; and process cooling equipment, as well as rotating and stationary heat exchangers for the power generation and industrial markets. This segment sells transformers for publicly and privately held utilities under the Waukesha brand name; and process cooling products and heat exchangers under the brand names of SPX Cooling, Marley, Yuba, and Ecolaire. Company description from FinViz.com.
SPX Corp is losing money. For Q4 they lost $86.1 million or -$2.06 per share after a -48 cent loss in the year ago quarter. Revenue of $395.3 million fell sharply from the $468.4 million in the year ago quarter. A lot of their loss came from divesting businesses that were marginally profitable or even losing money. They are trying to stop the bleeding. On an adjusted basis they reported earnings of 69 cents.
Earnings May 25th.
The company sold its European power generation business for "nominal cash at closing." That means they got rid of a loser and it did not cost them any additional money. They closed their dry-cooling tower business for $48 million. They also split into two companies, SPX Corp and SPX Flow (FLOW). After all their divestitures and spinoff they ended the year with only $100 million in cash. Last week they signed an agreement with creditors allowing them to keep the $48 million from the sale of the cooling tower business for another 360 days. The loan was partially secured by those assets and having to pay the loan down by that amount as called for in the prior agreement would have cut their cash on hand in half. The company said it was not looking to sell any other divisions at present but would be restructuring after the divestitures and trying to turn a profit. Good idea but not very convincing.
They guided for 2017 revenue of $1.3 to $1.4 billion and well below estimates for $1.47 billion. They did guide for earnings of $1.55 to $1.70, which would be an improvement if they can make it happen.
SPX Corp is not in good shape. It is a viable business but management made some bad decisions in the past and they are working through them. If the market weakens in April as is typically the case, SPXC is probably going to see more sellers than buyers. Investors have far more opportunities to buy growing companies rather than companies like SPX, which have been shrinking.
SPXC broke below support of the 100-day average and tried for three days to break back to the upside and failed. That average is now strong resistance. Back in November they tested the 200-day and that is the likely target on any continued decline.
Sell short SPXC shares, currently $23.26, initial stop loss $24.25
No options recommended because of price.