Why IHS's Shares Dropped

Is this meaningful or just another movement?

Travis Hoium
Travis Hoium
Sep 20, 2012 at 12:00AM
Other

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 information provider IHS (NYSE: IHS) fell as much as 19% today after the company announced a disappointing earnings report.

So what: Revenue rose 14% to $385.6 million in the fiscal third quarter, but it was well below estimates of $406.4 million from analysts. Adjusted earnings per share were $0.99, $0.02 short of estimates, and the company cut full-year guidance to $3.77, from $3.89 per share.

Now what: A 5% decline in non-subscription organic revenue is of concern to the company, as customers cut back on costs where they can. With that decline and slow organic growth overall, it's hard to see a reason to pay at least 24.5 times this year's earnings unless organic revenue picks up in both subscription and non-subscription businesses. I'm sitting out this move, and would wait for more improvement in operations before jumping on this stock.

Interested in more info on IHS? Add it to your watchlist by clicking here.