What happened

After reporting disappointing fourth-quarter profits and issuing downbeat profit guidance, shares of Horizon Global (NYSE:HZN), an international provider of towing and trailering equipment, fell by 13% as of 11:15 a.m. EST on Thursday.

coins falling through business mans hands

Image source: Getty Images.

So what

Horizon's fourth-quarter results were heavily affected by its recent acquisition of Westfalia. Here's a look at the company's quarterly results:

MetricQ4 2016Q4 2015Change (YOY)
Revenue $183.6 million $121.2 million 51.4%
Adjusted net income ($7.7 million) $1.1 million N/A
Adjusted earnings per share ($0.37) $0.06 N/A

Data source: Horizon Global. YOY = year over year.

By contrast, Wall Street was expecting revenue of $169 million and adjusted EPS of negative $0.12. Thus, the company beat expectations on the top line, but missed big on the bottom line.

Taking a closer look at the company's business segments, Horizon posted solid sales gains in North America, Asia-Pacific, Europe, and Africa this quarter thanks to market share gains in retail, industrial, and e-commerce. However, charges related to the Westfalia acquisition took a big bite out of profits.

Here's a look at the highlights from the company's full year:

  • Total revenue grew 12.8% to $649 million. On an organic basis, revenue grew by 3.3%.
  • Profit margin plunged 240 basis points to 1%. However, adjusted segment profit margin increase 160 basis points to 10%. 
  • Adjusted net income fell 44% to $12.4 million.
  • Adjusted EPS fell 48% to $0.64.

Turning to guidance, management is offering investors the following range for 2017:

Metric2016 Results2017 GuidanceChange (YOY)
Revenue $649 million $843 million to $876 million 30% to 35%
Adjusted operating profit $37 million $53 million to $59 million 43% to 59%
Adjusted earnings per share $0.64 $0.90 to $1.00 41% to 56%

Data source: Horizon Global. YOY = year over year.

While the revenue range compares favorably to what Wall Street was expecting, analysts were predicting $1.38 in adjusted EPS for the full year. Traders are selling off shares in response.

Now what

Short-term results aside, Horizon's results clearly indicate that the company is gaining market share and delivering on its promises to improve margins. CEO Mark Zeffiro also reaffirmed that improving margins across the entire business -- which includes Westfalia -- remains his No. 1 priority. 

It's also worth noting that the company successfully raised $210 million in February from its secondary common stock and convertible bond offering. The capital raise strengthened the company's balance sheet, lowered its future interest costs, and gives the company plenty of ammo with which to pay down debt or pursue acquisitions.

All in all, Horizon made a lot of progress in 2016 at improving its business, and it continues to provide long-term shareholders with plenty of reasons to remain optimistic. 

Brian Feroldi has no position in any stocks mentioned. The Motley Fool recommends Horizon Global. The Motley Fool has a disclosure policy.