Why Valmont No Longer Looks So Solid

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Valmont Industries closed down 1% yesterday after Stifel downgraded the fabricated metal products company from buy to hold.

So what: Along with the downgrade, Stifel analyst Nathan Jones removed his $175 price target on the stock, suggesting that he sees limited upside and possibly even significant downside at Valmont's current levels. While value investors might be attracted to the stock's recent decline, Jones believes that the discount is warranted given his forecast of an EPS decline in 2014.

Now what: Stifel sees strong near-term headwinds as many of Valmont's key markets take a cyclical breather. "After several years of powerful growth in several of Valmont's businesses, we now believe the uncertainty around continued organic growth and the ability to maintain margins as markets weaken in likely to create a continued overhang on VMI shares for the next few quarters," Stifel said. Of course, with the stock off more than 15% from its 52-week highs and trading at forward P/E of 12, now might be an opportune time for patient Fools to make a long-term commitment. 

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The article Why Valmont No Longer Looks So Solid originally appeared on Fool.com.

Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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