Why ADT Corp. Shares Plunged Today

Is this meaningful or just another movement?

Brian D. Pacampara, CFA
Brian D. Pacampara, CFA
Jan 30, 2014 at 11:11AM
Consumer Goods

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 home security specialist ADT Corp. (UNKNOWN:ADT.DL) plummeted 20% today after its quarterly results disappointed Wall Street.

So what: The stock has slumped in recent months on concerns over slowing growth, and today's Q1 results -- EPS fell 11% on a revenue increase of just 4% -- only reinforce those worries. In fact, adjusted operating margin fell 70 basis points over the year-ago period, suggesting that ADT's competitive position is weakening along with demand.

Now what: Management remains bullish about its long-term turnaround prospects. "The actions we are taking are placing us on the right path for the future," said CEO Naren Gursahaney. "Although it takes time for these activities to have a positive impact on our results, we believe the progress we are making is improving our position to capture higher growth in the future." When you couple ADT's worrisome operating trends with its still-hefty debt load, however, Fools would probably be better off watching from the sidelines.