Why Hollysys Automation Technologies Ltd Shares Tumbled Today

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 Hollysys Automation Technologies Ltd (NASDAQ: HOLI  ) fell more than 14% early Thursday, then settled to close down around 7.8% after the China-based automation and control technologies specialist released mixed fiscal third quarter results.

So what: Quarterly revenue rose 58.8% year-over-year to $95.8 million, which translated to 29.1% growth in adjusted net income, hitting $15.1 million, or $0.26 per diluted share. Analysts, on average, were looking for the same earnings of $0.26 per share, but on significantly higher revenue of $114.33 million.

Hollysys also reported a backlog of $602.9 million, or an increase of 61.2% over the same year-ago period.

As a result, and despite the top-line miss, Hollysys reiterated its fiscal 2014 guidance for revenue of $500 million to $530 million, with adjusted net income of $84 million to $86 million. Based on the 58.9 million shares outstanding as of March 31, 2014 -- and keeping in mind that share count will likely increase slightly -- that would mean fiscal 2014 adjusted net income per share in the approximate range of $1.43 to $1.46. Analysts, for their part, are currently modeling fiscal 2014 earnings of $1.35 per share on sales of $511.17 million.

Now what: That explains why Hollysys recovered some of its early losses later in the day, but I can't blame investors for their skepticism given the company's big Q3 revenue miss. I don't think current investors should be alarmed by today's results, and shares look reasonably priced trading around 12 times next year's expected earnings. I'll keep an eye on it in the coming quarters to see whether it can live up to its reiterated guidance. But personally, I'm just not particularly intrigued by Hollysys stock for now.

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