Why LSB Industries' Shares Dropped

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 chemical maker LSB Industries (NYSE: LXU  ) fell 13% today after the company announced a big disruption to production.

So what: The company announced late in the day that its Cherokee Nitrogen unit's ammonia plant had a pipe rupture and that its production will be shut down for three to five months. There weren't any injuries or environmental impact, which softens the blow a bit, but this will impact results going forward.

Now what: LSB Industries is still assessing damage, but it looks like it will have to pay a $2.5 million deductible for its insurance policy at the very least. This will no doubt be a short-term hindrance, but in the long term it may be an opportunity for investors. I'm not a buyer today because it appears we haven't hit bottom, but when shares complete their fall and more information comes out about the damage, investors will be able to assess the impact on earnings going ahead. If long-term earnings aren't significantly affected, it will provide a great discount for the opportunistic investor.

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