Why Cardinal Infrastructure Group Stock Just Crashed
Key Points
Cardinal Infrastructure Group posted a substantial sales beat in Q2, but earnings came in far below expectations.
Cardinal's margins are contracting, and growth for its backlog is slowing.
The company raised its full-year sales guidance, but investors have become less confident in the business's growth outlook.
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Cardinal Infrastructure Group (NASDAQ: CDNL) stock is getting crushed in Tuesday's trading. Shares were down 25.7% as of 11:30 a.m. ET despite relatively little movement for the broader market.
Cardinal published its second-quarter report before the market opened this morning, publishing mixed results that have sent its valuation tumbling. While the company is getting hit with a dramatic valuation pullback, shares are still up roughly 78% year to date.
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Cardinal stock sinks following big earnings miss
With the Q2 report it published this morning, Cardinal delivered a significant revenue beat alongside a large earnings miss that is receiving far more investor focus. The company posted a profit of $0.26 per share on sales of $226.9 million, while the average analyst estimate had targeted earnings of $0.47 per share on sales of roughly $274.7 million.
Sales were up roughly 114% year over year, and the company raised its full-year guidance, but the increase for its backlog in Q2 came in at a more modest 35%. For reference, the company's backlog grew 60% year over year in Q1.
What's next for Cardinal?
Cardinal has raised its full-year sales guidance to between $880 million and $900 million -- far above the average analyst estimate for sales of roughly $717.7 million prior to the company's Q2 report. On the other hand, management lowered its non-GAAP (adjusted) earnings before interest, taxes, depreciation, and amortization (EBITDA) margin guidance to between 16% and 18% -- down from previous guidance for a margin greater than 20%.
While the company delivered a substantial sales beat, margins were far softer than anticipated in the quarter -- and investors are selling out of the stock in response to concerns about the quality of the business's revenue. With margins contracting and growth for the company's backlog seeing a substantial deceleration, the infrastructure services specialist's growth outlook may be weakening even though its headline revenue numbers look impressive.
Should you buy stock in Cardinal Infrastructure Group right now?
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
