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Why Analogic Corporation Shares Crashed

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 Corporation (NASDAQ: ALOG  ) have lost 11% of their value today after the medical-tech company released weak guidance for its just-finished fiscal third quarter and for the full fiscal year. Trading in Analogic's shares was initially halted for 15 minutes pre-market, but it wasn't enough to prevent a double-digit opening-bell drop.

So what: Analogic now expects  to generate roughly $124 million in revenue and to earn $0.94 per share in profit for its fiscal third quarter, which ended in April. This compares quite poorly to Wall Street's consensus estimates of $136.3 million in revenue and $1.09 in EPS. Analogic now expects full-year revenue to drop by mid-single-digits, percentage-wise, as compared to an earlier forecast of roughly flat year-over-year revenues. This is the second consecutive downward revenue revision for Analogic, which had anticipated full-year revenue growth to be in the high single-digits, percentage-wise, earlier in the year.

Now what: By most accounts, Analogic has been a solid investment over the past few years -- the company's revenue hasn't risen much, but EPS and free cash flow  are both up by about 700% since late 2009. However, if the company expects fewer sales this year, it will have a hard time justifying an otherwise-reasonable P/E of 26, even if it can improve an already-strong bottom line. I'd tread cautiously today, as Analogic will report earnings soon. That report might offer valuable insight that today's guidance lacks, but for the time being, it doesn't seem like a great time to dive in.

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Alex Planes

Alex Planes specializes in the deep analysis of tech, energy, and retail companies, with a particular focus on the ways new or proposed technologies can (and will) shape the future. He is also a dedicated student of financial and business history, often drawing on major events from the past to help readers better understand what's happening today and what might happen tomorrow.

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