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 Multi-Fineline Electronix (NASDAQ: MFLX), or MFLEX, have fallen by more than 11% today after investors got unwelcome news in the form of a weaker batch of anticipated results and forward guidance from the flexible-circuit manufacturer.
So what: In addition to updating its guidance, MFLEX also announced preliminary results for its fiscal third quarter, which ended at the end of June. The company slashed those numbers worse than a teenager in a Friday the 13th sequel: MFLEX expects revenue of $136 million, well below its previously stated $155 million to $185 million range, and it now anticipates a negative gross margin that's 3.1% in the red. Analysts were looking for $171.8 million in revenue and a loss of about $10.3 million for the just-ended quarter. Last quarter, the company's negative gross margin was about three times as large, but MFLEX had previously anticipated breakeven gross margin, and its lowered revenue guidance is 20% lower than the year-ago quarter's result.
Guidance for the in-progress fiscal fourth quarter, ending in September, is slightly better, but not by much. MFLEX projects between $195 million and $215 million on the top line, paired with a gross margin range of 1% to 3%. Wall Street had sought $211.9 million on the top line and a narrow profit. The high end of this guidance surpasses the year-ago fiscal fourth quarter's $201.6 million result by 6.7%, but is not good enough to distract from today's bloodbath. Additionally, that year-ago quarter's 9.2% gross margin was much better than the anticipated results for 2013.
Now what: This was a pretty ugly round of news for MFLEX, which had already lost a third of its value over the past year before today's plunge. These data points seem to present a big flashing red warning sign telling investors to stay away. Will you pay attention to that warning sign, or are you crazy enough to try to squeeze this lump of coal into a diamond?
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