What happened

Shares of Stamps.com (NASDAQ:STMP) were getting shredded today. Investors brushed off better-than-expected results in its third-quarter earnings report as worries about slowing profit growth, a trade war with China, and a potential change in its relationship with the Postal Service persisted. Stamps.com stock closed the day down 9.7%.

A bin moves on a conveyor belt in a warehouse

Image source: Getty Images.

So what 

The postage specialist reported another round of strong revenue growth -- up 25% to $143.5 million, topping estimates at $132.5 million. However, gross profit growth in the quarter was slower, rising 18%, as service costs more than doubled to $25.1 million, and non-GAAP gross margin fell from 81.7% to 77.5%. Adjusted earnings per share increased just 3% to $2.76, but that still beat estimates at $2.34. 

CEO Ken McBride summed up the quarter:

We are very pleased with our third-quarter financial performance and with the successful closing of our acquisition of MetaPack. We achieved strong organic performance in our financial metrics in a traditionally seasonally slower period. We believe we are well positioned as we enter the seasonally strong fourth quarter, and we remain very excited about our long-term business opportunities.

Now what 

Management raised its full-year guidance in part to account for the Metapack acquisition, calling for revenue of $550 million to $580 million, up from a previous range of $530 million to $560 million. That compares with the analyst consensus at $565.7 million. On the bottom line, it raised its adjusted EPS guidance from a range of $10.15 to $11.15, to a range of $10.60 to $11.60, better than the average analyst estimate at $10.79.

Although the company beat estimates, traders seem more focused on slowing profit growth, the trade war, and a possible change in its contract with the post office. Shares of Stamps.com are now down more than 40% since their peak this summer on those concerns, and they could remain that way as profits are expected to be relatively flat through next year.

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