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 American Railcar Industries (NASDAQ: ARII) fell 15% today after reporting earnings.
So what: First-quarter revenue was down $13.0 million from a year ago to $182.1 million as more units were sold into leases rather than direct sales. Net income was up 16% to $20.8 million, or $0.97 per share, but that missed expectations of $1.13 per share from analysts.
Now what: When tankers are sold into leases, as they were last quarter, it takes revenue and earnings out of the quarter and spreads it over the length of the lease. This is good for the long term because American Railcar Industries can extract more value for shareholders, but it can lead to disappointment for short-term investors. I wouldn't be worried about the miss today because management is making the right moves in increasing leases and focusing on long-term value.
