About three months ago, I complained that a focus on miserly value occasionally blocked me from gains like that which Actuant
To say the very least, the market did not take kindly to the news in the earnings release from this smallish industrial company focused on electrical tools and hydraulic systems. The actual earnings themselves weren't so bad. Revenue rose about 11% (net of acquisitions and currency), margins expanded nicely, and the company showed growth in free cash flow on both a quarterly and year-to-date basis.
The "yeah, but" was in the guidance. The midpoint of the company's guidance for next year was about 6% below the pre-existing consensaguess. And so, naturally, if you're going to come up 6% short, your stock needs to fall about 18% that day. My, those markets are efficient, huh?
I realize that next year will be a bit more challenging, and I have to confess a little surprise that other people were so surprised by it. After all, while the company doesn't get a huge amount of revenue from its RV and truck businesses, both of those are weak now and likely to be weak next year (particularly the truck business). And who knows what the tool business will look like later this year and into next. Whether it's housing, energy, or general economic conditions, folks are more nervous about this sector in general.
The only good thing about 18% single-day drops is that they can produce longer-term values. The company has moved past product resets at retailers like Lowe's
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Fool contributor Stephen Simpson but has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
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