What happened
Cadre (CDRE 0.57%) stock underperformed the market this week. The company, which sells safety equipment to first responders, saw its stock fall 11% through early Friday trading compared to a 1.6% increase in the wider market, according to data provided by S&P Global Market Intelligence. That drop was enough to put Cadre into negative territory for the year, down 7% so far in 2023.
It was sparked by an earnings report that attracted a lukewarm reception on Wall Street.
So what
The company announced on Wednesday that sales landed at $124 million in the Q4 period that ended in late December, edging past the outlook that management issued back in mid-November.
Cadre benefited from higher prices, along with solid demand in a few key niches. Management said in a press release that the strong end to the fiscal year reflected their ability to "capitalize on our entrenched positions in law enforcement, first responder, and military markets."
Profitability declined though, mainly due to financial pressure from recent large acquisitions. Cadre generated $17 million of operating income this year, compared to $52 million in 2021.
Now what
Wall Street wasn't excited with Cadre's 2023 outlook that calls for sales to land between $463 million and $493 million. At the low end, that forecast implies revenue gains of just 1%. Additional acquisitions might push this figure higher, at the expense of reduced short-term profits. But a recession could also push sales lower at a faster rate.
Looking further out, Cadre is hoping to push profit margins higher over time through a mix of acquisitions, organic growth, and growing scale. Investors might need to be patient as they watch for progress in these areas, though, as the new fiscal year seems likely to deliver only modest sales gains.
That outlook doesn't threaten the bullish thesis for this stock, but it does mean investors might see more volatility in the share price until sales trends start accelerating again.