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Why Air Methods Shares Plunged

By Brian D. Pacampara, CFA - Apr 19, 2013 at 11:56AM

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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 air medical transportation company Air Methods (AIRM) sank 12% today after its preliminary quarterly results disappointed Wall Street.  

So what: The stock has soared over the past year on rebounding demand, but downbeat guidance for the first quarter is forcing analysts to recalibrate their valuation estimates. Of course, management blamed the drop in transported patients and high number of cancellations largely on bad weather, suggesting that the problem is short-term in nature.  

Now what: Management now sees a first-quarter loss of $0.14 to $0.16 per share, well below the average analyst estimate of a $0.34 profit. "We remain hopeful that flight volume and payer mix will return to historical levels in future quarters once weather and other seasonal factors moderate," CEO Aaron Todd reassured investors. With the stock now off about 20% from its 52-week highs and trading at a forward P/E discount to several of its peers, buying into that turnaround talk might not be a bad idea.

Interested in more info Air Methods? Add it to your watchlist.

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