Why CHC Group Ltd. Plunged Today

Is this meaningful or just another movement?

Mar 13, 2014 at 3:05PM

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 CHC Group(NYSE:HELI) sank 12% today after the helicopter services company's quarterly results and outlook missed Wall Street expectations.

So what: The stock has been volatile since its January IPO on valuation concerns, and today's third-quarter report -- loss of $0.32 per share on revenue of $454 million -- coupled with beat-down guidance only reinforces those worries. While maintenance and repair revenue soared 25%, CHC's total revenue only increased 3% from the year-ago period, giving analysts plenty of nervousness over its growth trajectory going forward.

Now what: Management now expects 2014 adjusted EBITDAR to be flat to slightly down and revenue to be flat to slightly up. "Long-term trends for oil-and-gas investments in deep and ultra-deep discovery and production -- where the need for our services is greatest -- remain robust," President and CEO William Amelio said. "We are pursuing our financial priorities by focusing on disciplined capital allocation, reduced leverage and positive free cash flow -- with safety leadership in the air and on the ground." When you couple the strong near-term headwinds facing CHC with its still-hefty debt load, however, I wouldn't be too quick to bet on it. 

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Brian Pacampara 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.

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