Why Progress Software Shares Plunged

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 Progress Software (NAS: PRGS) sank as low as 12.5% this morning after the enterprise software specialist slashed its second-quarter forecast.

So what: Progress' second-quarter top and bottom line outlooks represent a year-over-year decline of roughly 53% and 13%, respectively, forcing investors to lower their growth expectations considerably. Management cited its recent restructuring efforts, as well as weak global demand for the disappointing forecast, suggesting that Progress has some substantial headwinds working against it.

Now what: Management now sees second-quarter adjusted EPS of $0.17-$0.19 on revenue of $110 million-$115 million, well below Wall Street's view of $0.26 and $123.7 million. "Our results reflect a time of transition at Progress, yet we remain optimistic and confident about our long-term prospects that leverage our core strengths," CEO Jay Bhatt reassured investors. "Our intent remains to drive five percent year-over-year Core revenue growth in fiscal 2013 and seven percent in fiscal 2014." When you couple all the uncertainty surrounding Progress with its still-lofty P/E of 26, however, I'd be cautious about buying into that optimism.

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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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