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Why MDC Partners Inc Stock Plummeted Today

By Jeremy Bowman – Jul 29, 2016 at 1:50PM

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The marketing company delivered a subpar earnings report.

Image Source: MDC Partners.

What: Shares of MDC Partners Inc (STGW) were taking a spill Friday after the marketing company badly missed analyst estimates in its second-quarter report. As of 11:57 a.m. EDT, the stock was down 30.4%.

So what: MDC posted an earnings per share of $0.02, down from $0.56 per share a year ago and well short of estimates at $0.18, while revenue was essentially flat at $337 million, also missing the consensus at $343.2 million.

CEO Scott Kauffman said the quarter was a "challenging" one, but even though financial result were below expectations, "there's no doubt that we have a very strong underlying business that is positioned for meaningful growth in the second half of the year and beyond." He noted that the company had attracted net new business of $57 million thus far this year.

Now what: As a result of the poor quarter, management lowered its full-year guidance, which now calls for a 5.9% increase in revenue and a 6.2% uptick in adjusted EBITDA.

MDC shares are down about 50% from the spring as the stock tumbled after a report from short seller Gotham City Research said the stock was worth less than $1, arguing that its accounting is fraudulent and the company will be forced to restate several years of results. MDC responded to the accusations, saying its reporting was accurate, but today's results may have fed fuel to the fire. While the company's second half of the year sounds more promising, the stock may continue to wallow as long as the short seller cloud is hovering over it.

Jeremy Bowman 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.

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