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Here's Why U.S. Silica Holdings Plummeted 26% in October

By Scott Levine – Updated Nov 12, 2018 at 8:39PM

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Market volatility was far from the only thing that led to this stock's decline last month.

What happened

Shares of U.S. Silica Holdings (SLCA -1.18%), a leader in industrial silica products and solutions, sank 26% in October, according to data from S&P Global Market Intelligence. In addition to a wave of bearish sentiment from Wall Street, investors sold off shares following the company's reporting of its Q3 2018 earnings.

So what

Analysts on Wall Street showered U.S. Silica Holdings with pessimism throughout the month. Prior to the company reporting earnings, Connor Lynagh, an analyst at Morgan Stanley, downgraded U.S. Silica Holdings to underweight and reduced his price target to $18 from $25 according to The website reported that Lynagh believes the sand market is "deteriorating faster than he expected." Similarly, an analyst at Jefferies shared his bearish view of the stock on Oct. 17; Brad Handler downgraded the stock to hold, though he is more optimistic about the stock's price, reducing his price target from $37 to $20 -- slightly higher than Lynagh's estimate.

Standing on a red arrow, a businessman looks downward.

Image source: Getty Images.

Lastly, the stock was subject to scrutiny from Chase Mulvehill at Bank of America Merrill Lynch, which initiated coverage of the stock in the middle of the month. Like his fellow analysts, Mulvehill assumed a bearish outlook on the stock, assigning it an underperform rating and an $18 price target.

Providing additional dismay for investors, U.S. Silica reported less-than-stellar Q3 2018 earnings during the month. The company reported $423.2 million on the top line, failing to meet analysts' expectations of $467.9 million. A look at the bottom line didn't provide much solace for investors, as the company reported earnings (excluding one-time expenses related to acquisitions and newly constructed facilities) of $0.44 per share -- well below analysts' estimates of $0.59 per share.

Following the company's earnings report, it was subject to additional pessimism from the Street. An analyst at RBC Capital lowered his price target to $18 from $22, and an analyst at Wells Fargo reduced his price target to $18 from $24.

Now what

Although the stock suffered from a tsunami of bearish sentiment coming from Wall Street, many of the analysts' concerns seem to deal with the cyclical nature of the fracking sand business. Consequently, the sell-off in shares may present a compelling opportunity for investors with a long time horizon who are willing to weather the current market volatility.

Scott Levine has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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