II-VI Shares Plunged: What You Need to Know

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of specialty materials company II-VI (NAS: IIVI) were getting zapped by Mr. Market today, sinking as much as 20% in intraday trading after the company reported fiscal first-quarter earnings.

So what: Though II-VI saw positive momentum in many of its businesses -- infrared optics revenue climbed 24% while military and materials sales grew 30% -- it was also met with some challenges during the quarter. The near-infrared optics top line was affected by slower spending in the telecom market, while profitability was hurt by product mix and lower military sales. Overall profitability also took a hit from the bankruptcy of one of the company's customers.

The bottom line was that II-VI managed $0.29 in earnings per share for the quarter on $138 million in revenue. On average, analysts were expecting $0.32 in profit per share on $141 million in sales.

Now what: A current-quarter estimates miss is enough to disappoint many investors. But what usually gets investors even more worked up is when a company provides a forecast that is also softer than expected. For the upcoming quarter, the Wall Streeters were hoping that II-VI could deliver $0.35 in per-share profit on $148 million in revenue, but the company's outlook suggests revenue won't be any higher than $138 million and EPS will be between $0.26 and $0.30.

That said, the issues of this quarter and next sound more like a broader industry slowdown than problems specific to the company. So it could be that what's bad for current investors today -- that is, the big stock price drop -- may be good for those waiting on the sidelines.

Want to keep up to date on II-VI?Add it to your watchlist.

At the time this article was published The Motley Fool owns shares of II-VI. Motley Fool newsletter services have recommended buying shares of II-VI. 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.Fool contributor Matt Koppenheffer does not have a financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.

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