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.
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.
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.
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.