StoneMor Shares Dropped: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of cemetery-services company StoneMor Partners (Nasdaq: STON  ) were getting buried by the market today, falling as much as 17% even as the broader market rallied.

So what: In a press release following the close of trading yesterday, Standard & Poor's put StoneMor's credit rating on a negative watch, sparking concerns that it would be downgraded to below its current B level. At the same time, S&P downgraded the unsecured debt of StoneMor's subsidiary from B- to CCC+.

Now what: While both the company's credit rating and the rating on the subsidiary's notes were already well below investment grade, lower ratings are not a happy outcome for a company whose stated EBITDA -- a cash-flow measure -- is already barely covering its interest commitments.

Looking ahead, investors will want to see the company make progress toward improving its balance sheet and stabilizing its financing. If ratings agencies and bond investors continue to bite their nails over StoneMor's financial stability, yesterday's warning could become a downgrade, which could put the company in an even tougher financial position.

Of course, as my fellow Fool Alex Pape outlined back in August, there may be more than meets the eye when it comes to StoneMor's financials, so the S&P's take may not be quite as bad as it seems at first blush.

Want to keep up to date on StoneMor Partners? Add it to your watchlist.

The Motley Fool owns shares of Stonemor Partners. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Matt Koppenheffer has no financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter, @KoppTheFool, or on Facebook. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.


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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 30, 2011, at 5:21 PM, mattryan wrote:

    Do you have any insight on IPSU?

    It was a big loser today. Why?

  • Report this Comment On December 01, 2011, at 12:12 PM, jefffawcett wrote:

    what a shock, another Fool stock gets killed, down ANOTHER 15% today. Disappointed does not begin to describe how I feel about my subscription. "Had" "taken" "foolish" is more like it

  • Report this Comment On December 01, 2011, at 3:07 PM, chopchop0 wrote:

    I decided to bite under $24/share. Hoping I didn't catch a falling knife :)

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