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Why Shares of Aceto Corporation Plunged 23% Today

By Travis Hoium - Aug 26, 2016 at 3:42PM

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A bad earnings report masks some strength ahead for this chemical company.

Image source: Getty Images.

What: Shares of chemical company Aceto Corporation (ACET) fell as much as 23.2% in trading Friday after reporting fiscal fourth-quarter earnings. At 3:10 p.m. EDT, shares were still down 21.7%.

So what: Sales fell 7.6% in the quarter to $135.4 million and net income plunged 50.5% to $6.8 million, or $0.23 per share. On a non-GAAP (generally accepted accounting principles) basis, net income was down 26.7% to $10.3 million and earnings per share were $0.35. The results were below analysts' expectations of $146.7 million in revenue and $0.39 in earnings per share, which is comparable to the non-GAAP EPS figure. 

Management said that weak performance and tough comparisons from its Rising Pharmaceuticals business led to the disappointing results, but new products and strong trends in generics should lead to better results in fiscal 2017.

Now what: The down results aren't a huge surprise for the fiscal fourth quarter; it's more that analysts didn't know just how low to set expectations. But management is expecting to return to growth this coming fiscal year, with strength in the first half of the year. And with generics becoming a growing business, there should be a lot of room for growth. Long-term, this should be a buying opportunity, even if the quarterly news wasn't very positive for investors.

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