FBR Capital downgraded Knowles Corp (NYSE: KN) from Market Perform to Underperform with a price target of $15.00 (from $23.00).

Analyst Christopher Rolland commented, "We believe that Knowles Corporation's (KN) weaker-than-expected 1Q15 revenue and gross margin guidance exemplifiy our concerns around microphone MEMS commoditization and increasing competition, highlighted in our December 4, 2014, initiation report: "Sidelined on Recent Stumbles As Competitive Pressures Mount." Today, we downgrade KN shares from Market Perform to Underperform, as it appears these pressures are progressing more rapidly than originally anticipated. While we were pleased to see the company’s mics were requalified at Apple (to start again in 2Q15), we were disappointed in the steep drop-off in 1Q15 guidance for its remaining mobile consumer electronics (MCE) segment, guided to fall ~25% QOQ. This guidance was particularly disappointing as it was not affected by the typical sequential fall-off in iPhone builds into 1Q and should have been helped by inventory replenishment (and GS6 builds) at Samsung. (We understand AAC has a growing position in the flagship handset.) Even when adding an incremental ~$30M contribution from Apple in 2Q15 (we included our Apple math later), we were still forced to slash our 2015/2016 pro forma EPS from $1.68/$2.08, to $1.05/$1.55, driving a multiple rerating and price target reduction from $23 to $16. (We note AH trades at ~$19 a share.) While we applaud the restructuring program, we think the absence of substantial top-line growth and intensifying competition are likely to make it difficult to drive meaningful EPS leverage. Accordingly, we lower our rating from Market Perform to Underperform and our price target to $16, from $23, based on 18x our pro forma CY15 EPS estimate (including SBC, adding net debt, and excluding net interest income). "

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Shares of Knowles Corp closed at $21.64 yesterday.