Personal Finance

Why Cubic Corporation Crashed 10% Today

Cartoon of a stock chart falling through the floor

What happened

Shares of defense contractor Cubic Corporation (NYSE: CUB) dropped nearly 13% in early Tuesday trading, before retracing to end the day down "only" 10.8% by close of trading.

So what

Cubic Corporation reported its fiscal second-quarter 2017 earnings after close of trading on Monday, meaning that Tuesday's traders were the ones to get first crack at reacting to the news -- and react they did.

For fiscal Q2, Cubic reported a 6% decline in sales to $343.7 million, and a 95% decrease in profits -- to just $0.02 per share. And while investors were expecting a big decline (analysts had forecast $0.04 per share), the size of this disappointment took them somewhat by surprise.

It's also done something of a number on Cubic's results for the year to date. Last year, Cubic booked an $0.18-per-share profit in its first half. But thanks to Q2's big loss, earnings per share at the company are now $0.09 in the red -- and Cubic faces the prospect of digging itself out of a hole if it hopes to earn any sort of profit at all this year. For the record, analysts are still hoping to see Cubic end the year with $0.61 in (positive) profits.

Cartoon of a stock chart falling through the floor

"Has it stopped falling yet?" Image source: Getty Images.

Now what

Will the company get there? Management doesn't seem so sure it will. Warning that "guidance for the current fiscal year is highly dependent on the order intake for our short order cycle businesses," Cubic took a cautious tone in issuing revised guidance for the rest of this year. As of today, management sees sales of between $1.5 billion and $1.54 billion as attainable (and Wall Street is on board with that, predicting sales of $1.52 billion).

As for profits, though, Cubic says "EPS guidance has been withdrawn due to the potential for income tax expense volatility." The company simply isn't sure how much it will earn on those revenues this year...and given how bad the news on Q2 was, investors aren't waiting around to find out.

10 stocks we like better than Cubic

When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor , has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Cubic wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of May 1, 2017

Rich Smith has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics


Latest Personal Finance Videos

    The Motley Fool

    Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

    Learn More