Please ensure Javascript is enabled for purposes of website accessibility

Why Ferroglobe Stock Is Crashing Today

By Matthew DiLallo - Updated Nov 27, 2018 at 11:51AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The silicon-metal maker reported some deeply disappointing news.

What happened

Shares of Ferroglobe (GSM 10.73%) cratered on Tuesday, dropping nearly 55% by 10:45 a.m. EST after the silicon-metal maker reported disappointing third-quarter results.

So what

Ferroglobe recorded $526.8 million of revenue during the third quarter. While that was nearly 17% higher than the year-ago quarter, it came in $37.2 million below analysts' expectations. Meanwhile, the company reported only $100,000 (or $0.00 per share) of adjusted net income, down from $25.7 million in the second quarter and well below the $9.2 million it earned in the year-ago period. And it came in $0.15 per share below the consensus estimate. Driving the disappointing results was a deterioration in market conditions for the company's main products during the quarter.

A bright red arrow going down.

Image source: Getty Images.

Because of that, the company is taking "swift action," according to CEO Pedro Larrea, to optimize its position. It is curtailing production in its silicon-metal and manganese-based alloys businesses to control costs and boost free cash flow. But despite those moves, Larrea said, its "financial results may continue to be challenged in the near term," meaning its free cash flow targets for the second half of the year have now become a "stretch" goal.

Now what

The rapid deterioration in Ferroglobe's key markets caught investors and analysts off guard. While the company quickly acted to address those issues, it's unclear when market conditions might improve, which could put more pressure on its results. Because of that, and some other problems with the company's markets, investors should stay away from this stock.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Ferroglobe PLC Stock Quote
Ferroglobe PLC
$6.19 (10.73%) $0.60

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.