Why Analogic Corporation Shares Flopped

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 Analogic (NASDAQ: ALOG  ) , a developer of medical imaging and security systems to the health-care and airport security industries, fell as much as 11% after reporting its first-quarter earnings results last night after the closing bell.

So what: For the quarter, Analogic reported an 8% decline in revenue to $110.1 million, hurt by order delays in medical imaging equipment as well as ongoing legacy product transitions, while profits tumbled to just $0.06 per share from $0.53 per share in the year-ago period. By comparison, Wall Street expected $130 million in revenue and an $0.87 per-share profit, so these results weren't in the same zip code as analysts estimates! Looking ahead, Analogic's management team did stick to its guns with expectations of high single-digit growth, which means it's likely that those delayed medical imaging orders have just been pushed to a different quarter in fiscal 2014.

Now what: That was one monster miss! On one hand, the company's talk of reaching mid-teen operating margins within the next two or three years is exciting and should keep the stock from tumbling too hard. On the other hand, Analogic is susceptible to order delays like this since a few customer make up such a large chunk of its OEM revenue stream. Over the very long run, Analogic looks to be in fine shape, but you're almost assuredly going to run into a quarter like the one we're witnessing today every now and then, so keep that in the back of your mind.

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