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.
So what: The stock has rocketed over the past year on a string of market-topping quarters, but today's second-quarter results -- revenue fell 4% to $284.3 million versus the consensus of $296.7 million -- coupled with downbeat guidance is forcing Mr. Market to sober up. Management blamed the gloomy report on weak North American demand, pricing pressure, and unexpected operating delays, raising plenty of uncertainty about its profitability going forward.
Now what: Management now expects volume to be flat in 2013, versus its prior forecast of a 3% increase. "We remain confident that our pricing management efforts and sales mix will position AEP to deliver stable volumes in the second half of 2013," Chairman and CEO Brendan Barba reassured investors. "We are working to complete our product qualification efforts and equipment installation related to the Webster and Transco businesses and we believe we have resolved most of these challenges." Of course, with a balance sheet that remains heavily leveraged and a stock that is still up about 100% from its 52-week lows, I'd wait for much more of a pullback before buying into that turnaround talk.
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