Why Covanta's 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 waste-to-energy company Covanta (NYSE: CVA  ) fell 12.4% today after the company reported earnings.

So what: Third quarter revenue rose 3.6% to $427 million, and net income from continuing operations rose slightly to $28 million, or $0.28 per share. Revenue was in-line with estimates and earnings were ahead of estimates, but outlook is what's in focus today.  

Full-year earnings guidance was lowered to $0.33-$0.43 per share from a previous range of $0.40-$0.50 per share and below estimates of $0.44.

Now what: Management says that unscheduled outages, lower than expected steam demand, and slower organic growth have resulted in the lower guidance. But keep in mind that the company begins a contract in New York in 2015, something management is already preparing for. The rest of this year and 2014 will be a challenge, but the long-term thesis is intact and Covanta has the opportunity to be a great buy if it can execute its strategy into 2015.

An energy revolution is coming
Covanta is creating its own energy revolution, but a larger one is brewing under the radar. But it won't stay hidden much longer with forward-thinking energy players like GE and Ford already plowing sizable amounts of research capital into this little-known stock... because they know it holds the key to the explosive profit power of the coming "no choice fuel revolution." Luckily, there's still time for you to get on board if you act quickly. All the details are inside an exclusive report from The Motley Fool. Click here for the full story!


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