What happened

Shares of networking equipment provider Ubiquiti Networks (NYSE:UI) dropped nearly 12% in early trading Friday before clawing their way back to a 9.3% loss as of 12:35 p.m. EDT -- a surprising result given that the company just reported what appear to be strong earnings and decent sales for its fiscal Q3 2019.

Ubiquiti posted GAAP earnings of $1.25 per share on sales of $284.9 million for the quarter. This compares favorably to the $1.10 per share that analysts had predicted the company would earn, while its revenue fell only ever so short of consensus estimates for $286 million in sales.

Falling stock charts superimposed over digital map of the world

Image source: Getty Images.

So what

Investors' sour reaction to Ubiquiti's report may be explained by the fact that although the company beat earnings expectations, its profits per share nonetheless declined 5% year over year. (Conversely, Ubiquiti's sales number that missed estimates was up 14% from Q3 last year.)

Now what

As far as the company's outlook goes, Ubiquiti said only that it expects "to achieve results at the high end of the guidance range previously provided for the full fiscal year ending June 30, 2019" -- forcing investors to page back through their notes to figure out what exactly Ubiquiti "previously provided," and when.

Turns out, that latest guidance came out way back in August 2018, when the company reported fiscal 2018 results. Ubiquiti predicted that fiscal 2019 would see the company earn between $4 and $4.80 per share on sales of $1.1 billion to $1.2 billion.

And this, I suspect, is why investors were underwhelmed with today's report, despite the earnings beat. Ubiquiti says it will earn close to $4.80 per share on sales of $1.2 billion? Well, that's just great. Unfortunately, since Wall Street was already predicting the company would earn $4.75 per share on nearly $1.2 billion in sales, that expectation is already baked into the stock's price -- leaving it no room to rise today, no matter how good the news is.

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