Why Parametric Shares Got Crushed

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 Parametric Technology (NAS: PMTC) plummeted 20% on Thursday after the product-design software specialist slashed its second-quarter outlook.

So what: Parametric's shares have soared in 2012 on blowout earnings, but today's warning is forcing Mr. Market to sober up quickly. Management cited its failure to close a large European contract and weaker-than-expected North American sales for the cut, suggesting that Parametric has far more headwinds working against it than investors had thought.

Now what: Management now sees second-quarter adjusted EPS of $0.26 to $0.28 on revenue of $300 million, down from a prior view of $0.32 to $0.36 on a top line of $305 million to $320 million. "While we are disappointed with our Q2 results, we are strategically positioned in attractive growth markets and remain confident in our ability to drive long-term growth and profitability," said CEO James Heppelmann. With the stock still up more than 50% from its early October lows and trading at a plus-25 P/E, however, I'd wait for even more of a pullback before jumping in.

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At the time thisarticle was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. 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 Fool's disclosure policy always gets a perfect score.

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