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Why Poly Stock Just Crashed 7.5% Despite Beating Earnings

By Rich Smith – Updated Jul 30, 2021 at 4:34PM

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Pro forma earnings aren't the problem. GAAP -- and guidance -- are.

What happened

Shares of Poly (POLY) stock dropped 7.5% in 12:20 p.m. EDT trading Friday even while beating earnings soundly last night. Earlier this spring, the company changed its ticker symbol to POLY on the New York Stock Exchange (NYSE). Poly was formerly known as Plantronics and Polycom, which used PLT as its ticker symbol. However, in Security Exchange Commission (SEC) filings, the company is officially identified as Plantronics.

Expected to report a $0.46 pro forma profit on less than $420 million in sales in the fiscal first quarter of 2022, the communications equipment manufacturer instead reported a surprise $0.60 profit on sales of $432 million.  

Big red arrow going down over a stock chart.

Image source: Getty Images.

So what

Q1 revenues grew 20% in comparison to last year, "driven by continued strength in Video and rebounding Voice demand," up 94% and 34%, respectively, said the company.

That's the good news. The bad news is that gross profit margins declined 330 basis points to 40.6%, resulting in an operating loss, and a net loss, too, of $0.88 per share -- the exact opposite of what the company's pro forma "profit" would have suggested.  

Now what

And the news gets worse from there.

In updated guidance, Poly warned that its sales growth rate will slow in the second quarter of 2022 and probably miss analyst estimates as well. New guidance centers on $430 million in sales, which if correct, would represent less than 5% sales growth from last year's $411 million. Additionally, $430 million in sales would fall about 4% short of analysts' projected $447 million. Similarly, the company's guidance for pro forma earnings in Q2 -- between $0.50 and $0.70 per share -- falls short of Wall Street's anticipated $0.72 share price. 

So if investors are just a wee bit upset with Poly today...maybe they have a right to be.

Rich Smith 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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