Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of X-ray inspection systems specialist American Science & Engineering (Nasdaq: ASEI) plunged 17% today after its quarterly results disappointed Wall Street.

So what: American Science's huge fourth-quarter miss -- EPS of $0.15 on revenue of $39.8 million versus Wall Street's view of $0.83 and $60.7 million -- reinforces serious worries over the effect of U.S. defense budget cuts. Gross margin also narrowed to 44.4% from 45.6% in the year-ago period, triggering fears about its long-term profitability as well.  

Now what: Given the defense spending headwinds working against management, I wouldn't expect a turnaround anytime soon. "The situation has necessitated a realignment of our business strategy in order for us to recover," CEO Anthony Fabiano cautioned. "In addition to adjustments in marketing strategies and resolution of some constraints on key projects, we've implemented cost cutting measures across the board to drive higher productivity as well as overall efficiency through business process reengineering."

Of course, with the stock flirting with its 52-week low -- down nearly 40% over the past year -- and currently sporting a dividend yield of 3.6%, much of the risk might already be baked into the price.

Interested in more info on American Science? Add it to your watchlist.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.