Industrials Slip as Weak Guidance Leads Sector Lower

Brittney Barrett  |

The broader markets declined today as concerns over the European banking crisis heightened. The declines come off two days of impressive gains, inspired largely by whispers that resolution was in sight. The failure for a conclusion to materialize led most sectors lower, but industrials stood out as among the hardest hit. Leading the pack lower was MasTec Inc. (MTZ), which tumbled after announcing its third quarter results.  Shares tanked immediately following the report as a 3Q revenue increase of 37 percent to $865 Million was overshadowed by potential obstacles in the fourth quarter. Organic revenue growth of 19 percent, a record back log and a 10 percent increase in EBITA were not enough to distract investors from what Jose R. Mas, the company’s Chief Executive described as “less-than-previously-expected fourth quarter volume” from the company’s primary customers.

MasTec, which is a national infrastructure construction company, is anticipated to have strong annual earnings regardless of the final quarter of the year, but  the adjustment  in projections led shares lower by 20 percent. MasTec adjusted 4Q expectations from an anticipated 35 cents per shares to between 12 and 15 cents per share. Even after the declines, MasTec remains up 20 percent YTD.

MasTec may have been the most dramatic decliner in the sector but it had plenty of company on Friday. Comfort Systems USA Inc. (FIX). FIX, which provides heating, ventilation, air conditioning installation, maintenance, repair and replacement services in the U.S., fell close to 10 percent after rising earlier in the week in anticipation of more positive results. A net loss of $36,569,000, or $0.98 per diluted share for the quarter that ended in September did not sit well with investors, who shed shares quickly in early trading and led the company down 5 percent for the week. Comfort Systems is still up 20 percent for the one-month percent though a recent that the company acquired a majority interest in Environmental Air Systems, may prompt investors to continue to abandon holdings into next week.

Fluor Corp. (FLR) joined the companies on their trip lower, falling over 6 percent after the release of its most recent earnings. Like MasTec, the engineering and construction company posted impressive third-quarter profits, but its 2012 guidance came in beneath analyst expectations and sourced optimism surrounding the stock in the last month.

Rofin-Sinar (RSTI), a developer of laser-based cutting and welding tools, took a similar hit, plunging over 10 percent in spite of reporting record revenues for the fourth quarter and fiscal 2011 as a whole. A 41 percent improvement in annual turnover and a net income rise of over 10 percent did not register with investors after the company adjusted its first-quarter 2012 earnings.  Rofin-Sinar said they expect 36 cents a share for the quarter, well beneath the 50-cent average analyst projection that had contributed to shares adding over 25 percent over the last month.

The investor reactions in the sector seemed to be overblown, but the repeatedly strong earnings and weak guidance sounded an alarm about the future of the U.S. economy and particularly the path of industrial stocks.


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