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What: Shares of China Automotive Systems (NASDAQ:CAAS) were slipping today, down as much as 25% after a disappointing earnings report.
So what: Sales for the automotive supplier increased 21.8% to $97.9 million, but that was well short of expectations at $102.7 million. Earnings per share, meanwhile, came in at $0.18, matching expectations. CEO Qizhou Wu noted that the company grew its market share during the quarter as vehicle sales in China only increased by 12.3%. Despite the growth in revenue, earnings per share actually fell from $0.21 a year ago due to a lower gross margin on a change in the product mix, and increases in selling and R&D expenses.
Now what: Even with the poor sales growth and the drop in the share price, management raised its full-year revenue growth guidance to 15%, or $387 million, though that is below analyst estimates of $407 million. Still, China Automotive's shares have been all over the place in the past year, and with recent economic indicators from China looking up, I wouldn't count out the auto supplier despite the underwhelming sales growth. A P/E of 8.4 doesn't hurt either; profits should begin to grow again as long as sales are increasing.
Fool contributor Jeremy Bowman 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.