Why AEP Industries's Shares Popped

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 AEP Industries (NASDAQ: AEPI  ) jumped 18% today after releasing earnings.

So what: The fiscal third quarter ending July 31 saw revenues fall slightly to $291.9 million and net income drop from $12.3 million to $1.8 million, or $0.32 per share. But analysts were only expecting $0.26 per share in earnings so even falling results beat what the market had priced in.  

Now what: Resin costs can be very volatile and that's a big driver of the decreased profit year over year. That's a challenge the company will continue to face but a 1% decline in volumes is of even more concern over the long term. With an absence of growth I think paying 38 times fiscal 2014 earnings estimates is too expensive and today's pop is very much overdone.

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Related Tickers

9/23/2016 4:00 PM
AEPI $111.43 Up +0.14 +0.13%
AEP Industries CAPS Rating: No stars