Central European Distribution Shares Plunged: What You Need to Know

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 liquor slinger Central European Distribution (NAS: CEDC) wobbled today, stumbling to a 22.3% drop at worst amid heavy trading.

So what: The much-followed company's second quarter sent the stock face-down in the ditch. Sales rose 21% year over year, but $0.25 of year-ago earnings per share turned into a net loss from continuing operations of $0.09 per share.

Now what: CEO William Carey pointed to tricky re-licensing procedures in Russia as a major stumbling block. He claimed that new regulations are making it harder for smaller players to succeed in Russia these days, but stopped short of saying whether CED will gain or lose in that equation. But revenue guidance for the full year went up while earnings targets moved down, so we're looking at higher prices and lower profits. CED may be an official Global Gains recommendation, but short of a powerhouse like Diageo (NYS: DEO) or Pernod Ricard with all their marketing and distribution muscle, I don't see how any liquor distributor could expect to grow in the saturated Eastern European markets when faced with those kind of headwinds.

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At the time this article was published Fool contributor Anders Bylund holds no position in any of the companies discussed here. The Motley Fool owns shares of Diageo. Motley Fool newsletter services have recommended buying shares of Diageo and Central European Distribution. 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. The Motley Fool is investors writing for investors.

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