Why Esterline Technologies Shares Fell

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 defense supplier Esterline Technologies (NYSE: ESL  ) sank as much as 11%, before finishing the day down 6%. A revised outlook in its preliminary earnings report appears to be the culprit.

So what: The company scaled back adjusted EPS guidance for the fiscal year, from $5.10-$5.25 to $4.87 to $5.00, blaming lower production of aircraft, such as the Hawker Beechcraft T-6B Trainer and the Airbus A380, as well as F-35 inventory rebalancing at Lockheed Martin (NYSE: LHM  ) . The company also took a $52 million non-cash goodwill impairment charge for its Racal Acoustics defense business.

Now what: CEO Brad Lawrence said the slowdown causing the revised guidance was a temporary issue, and expressed confidence that his company’s "solid market positions optimize its ability to seize opportunities" as they arise. Defense is a notoriously cyclical industry, so investors shouldn’t be surprised to see speed bumps like this from time to time, but this shouldn’t change your overall investing thesis. A 6% haircut seems deserved considering the cut in projections.

Want to stay connected with Esterline? Just click on the link to add Esterline Technologies to your watchlist.

Fool contributor Jeremy Bowman holds no positions in the companies in this article. The Motley Fool owns shares of Lockheed Martin. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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