Why Sanmina Shares Sank

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 Sanmina  (NASDAQ: SANM  ) plunged more than 12% Tuesday after the integrated manufacturing solutions company beat expectations during fiscal fourth quarter, but issued disappointing forward guidance.

So what: Quarterly revenue fell 4.4% year-over-year to $1.51 billion, which was in line with analysts' average estimates. That translated to adjusted earnings of $0.46 per diluted share, which beat estimates for earnings of just $0.40 per share on the same basis.

However, the company also stated it expects fiscal first-quarter revenue to fall sequentially to $1.425 billion to $1.475 billion, with adjusted earnings per share of $0.35 to $0.41. Analysts, by contrast, were modeling first-quarter earnings of $0.42 per share on sales of $1.53 billion.

Now what: Management blamed the slowdown on both normal seasonality and a slower-than-expected ramp of new programs. Even so, it's worth noting CEO Jure Sola also said the lull should prove temporary, and that they "expect to deliver modest growth and further improve [their] financial results for fiscal year 2014."

To be sure, the company's decline in profitability over the past year seems alarming. However, there appears to be plenty of pessimism priced in with shares currently trading at just 8.9 times next year's estimated earnings. All in all, while I wouldn't necessarily load up on Sanmina stock while earnings are still falling, I think investors should at the very least consider adding it to their watchlists.

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