Why Steiner Leisure Ltd. Shares Plummeted

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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: Share of Steiner Leisure Ltd. were getting a stress fracture today, falling as much as 21% before closing down 15% after losing a contract with Celebrity Cruises.

So what: The spa-services provider announced today that the cruise line was terminating an agreement for Steiner to serve its ships. As a result, the company said it would lose profits $0.24/share in 2014. CEO Leonard Fluxman said of the development, "We, of course, are disappointed by Celebrity's decision, particularly in view of our revenues being at historic highs on Celebrity's ships." Fluxman added that he believed that Celebrity's decision was made for strictly marketing reasons.

Now what: Analysts were expecting per-share earnings of $3.70 next year, so a $0.24 drop is not crushing the company by any means. Still, Fluxman's admission that the Steiner was being dropped for marketing reasons seems to be telling. Celebrity clearly believes there are better spa brands out there that they would like to align themselves with. If Celebrity turns out to be the only company to jump ship on Steiner, today's drop probably isn't any cause for concern, however a second contract termination could be deadly for the spa company.

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The article Why Steiner Leisure Ltd. Shares Plummeted originally appeared on Fool.com.

Fool contributor Jeremy Bowman and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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