Shares of medical equipment company Invacare Corporation (NYSE:IVC) lost a whopping 43.4% of their value yesterday on over 23 times the average daily volume. What event triggered this massive sell-off?
The long and short of it is that investors were none too pleased with Invacare's third-quarter earnings report, which was released after the closing bell on Monday. Apart from a nearly $6 million miss on revenue for the three-month period, Invacare noted that it expects costs to continue to rise going forward as a result of President Trump's trade war.
Adding fuel to the fire, the recent changes issued by the Centers for Medicare and Medicaid Services also seemingly hurt the company's respiratory and lifestyle product sales during the quarter -- an issue that may persist for a while longer as U.S. providers work to fully understand this new reimbursement landscape.
Invacare's outlook took a big hit with this third-quarter earnings report. The fact of the matter is that the company is already losing money and these two new headwinds certainly won't help matters going forward.
Was this drastic downturn warranted? While bargain hunters might be tempted to grab some shares today after such as steep move lower, Invacare's stock doesn't jump off the page as a likely turnaround candidate for a few reasons. Besides the company's weak outlook, Invacare's cash and cash equivalents also slipped to a mere $118.3 million at the end of the third quarter. That's not a whole lot of cash for a company that's been losing $14.2 million per quarter, on average, during the first nine months of 2018.
Simply put, Invacare appears headed toward a sizable capital raise in the next six months, which will likely put even more downward pressure on its shares.