Please ensure Javascript is enabled for purposes of website accessibility

Why Essendant Inc. Stock Plummeted Today

By Steve Symington – Updated Sep 28, 2018 at 11:57AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The workplace products specialist lowered its guidance after a tough quarter.

What: Shares of Essendant Inc. (ESND) dropped 36.6% Thursday after the workplace products distributor announced weaker-than-expected second-quarter 2016 results.

So what: Quarterly revenue climbed 0.9% year over year, to $1.35 billion, while adjusted net income fell 34.2%, to $20.3 million. Adjusted earnings per diluted share declined 32% year over year, to $0.55. Analysts, on average, were looking for adjusted earnings of $0.84 per share on revenue of $1.36 billion. 

Image source: Essendant Inc.

During the subsequent conference call, Essendant CEO Bob Aiken blamed "significant headwinds to gross margin in our office products and JanSan businesses." Aiken elaborated those headwinds were primarily the result of "general market pressures, a shift in mix to larger and lower-margin customers, and a shift in mix to lower-margin categories such as paper and ink and toner."

Now what: Consequently, Essendant also reduced its guidance for the full year, calling for revenue to increase 1% to 2% (compared to 1% to 5% previously) to a range of $5.4 billion to $5.475 billion, which should result in adjusted earnings per share in the range of $2.15 to $2.30 (compared to $3.20 to $3.40 previously). 

To be fair, Aiken promised the company would accelerate its previously outlined business strategies while working to improve margins and reduce costs. But in the meantime, given its underwhelming performance and enormous guidance reduction, it's no surprise to see investors so aggressively bidding shares of Essendant down today.

Steve Symington has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Essendant Inc. Stock Quote
Essendant Inc.
ESND

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
356%
 
S&P 500 Returns
118%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.