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Why Cimpress NV Stock Dropped Today

By Steve Symington - Jul 30, 2015 at 2:57PM

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2:45 p.m. ET: Shares of the marketing materials specialist fell nearly 20% after the company reported earnings and announced a change in guidance.

What's happening: Shares of Cimpress NV (CMPR 6.40%) were down 19.7% as of 2:45 p.m. Thursday after the marketing and promotional materials company announced solid fiscal-fourth-quarter 2015 results, but also worried investors by saying it will no longer provide specific guidance.
 
Quarterly revenue climbed 13% year over year to $380.5 million, which resulted in a 10.4% decline in adjusted net income to $22.8 million, and a 12% decrease in adjusted net income per diluted share to $0.66. Analysts, on average, were only anticipating earnings of $0.38 per share, and revenue of $360.2 million.
In the outlook section of today's press release, however, it simply stated "Cimpress is focused on leveraging its investments for a strategic repositioning of its brand. The company also expects to benefit from acquisitions, expansion in new geographic areas and customer additions."

Why it's happening: To his credit, Cimpress CEO Robert Keane did release a lengthy letter to investors (opens PDF) along with today's earnings press release. In it, he outlines progress made so far in plans the company unveiled last year to generate shareholder value by becoming the "world leader in mass customization," maximizing intrinsic value per share, repositioning the Vistaprint value proposition to be more attractive to consumers, launching a multi-year project to build a software-based mass customization platform, and pursuing mergers and acquisitions to contribute to and benefit that platform. 

However, Keane also notes the company will not provide forward guidance beyond reviewing "how we think about value creation" and applying those concepts to the business, Cimpress' "general view of potential organic growth rates," and its discretionary growth spending plans for the upcoming fiscal year.

Consequently, Keane added, starting with the current quarter Cimpress "will stop reporting many of the operational metrics we have previously reported on because, given the changes we have made over the relatively recent past, they are no longer relevant to how our top management and supervisory board views and measures our business. We understand that these changes may require a transition in modeling and even in mind-set for some investors and analysts who are used to having the type of forward-looking guidance and retrospective operating metrics that we provided previously."

That's fair enough. Though our fickle market is notoriously averse to change, it doesn't sound like this newer, more-vague guidance is a result of underlying problems with the business. What's more, Cimpress promised to review and explain its thinking and contents of the letter in more detail during its upcoming investor day. In the end, if and when they convince investors this is truly the best way to maximize long-term intrinsic value per share, I won't be the least bit surprised if today's pullback doesn't last.

Steve Symington has no position in any stocks mentioned. The Motley Fool recommends Cimpress. 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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