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Why Pegasystems Inc. Stock Plunged Today

By Steve Symington – Feb 27, 2015 at 1:17PM

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Pegasystems fell 15% after reporting mixed fourth-quarter results. Here's what investors need to know.

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's happening: Shares of Pegasystems (PEGA 5.24%) fell 15% Friday after the software company announced mixed fourth quarter results and weaker-than-expected guidance.

Why it's happening: Quarterly adjusted revenue rose 9% year over year to $169.1 million, which translated to a 6% increase in adjusted earnings per diluted share to $0.33. Analysts, on average, were expecting slightly lower earnings of $0.32 per share on higher sales of $175.8 million.

"We are pleased with our performance in 2014," said Pegasystems CFO Rafe Brown, "and with continued application enhancements, a strong customer base, and increased marketing to develop new customers, we believe the company is positioned for growth in 2015 and beyond."

Speaking of which, Pegasystems said it expects full year 2015 revenue to be approximately $653 million, with adjusted earnings per diluted share of $0.78. Both figures are represent solid growth over total 2014 adjusted revenue and earnings of $593.4 million and $0.74 per share, respectively. But they also fell below Wall Street's models, which called for 2015 revenue of $680.2 million, and earnings $0.94 per share. With that in mind -- and whether those high expectations were merited or not -- it's unsurprising the market is bidding down Pegasystems stock today.

Steve Symington has no position in any stocks mentioned. The Motley Fool recommends Pegasystems. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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