Why Lufkin Shares Got Crushed

Updated

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 oilfield services specialist Lufkin Industries (NAS: LUFK) sank 19% on Monday after its quarterly results and guidance came in well below Wall Street expectations.

So what: Lufkin's disappointing second-quarter -- adjusted EPS of $0.66 versus the consensus of $0.82 -- coupled with a gloomy full-year outlook reinforces concerns over the company's profitability going forward. Specifically, Lufkin continues to see manufacturing and field service disruptions as a result of escalating labor unrest in Argentina, forcing several Wall Street analysts to downgrade the stock on all the uncertainty.


Now what: Management now sees full-year adjusted EPS of $3.00-$3.20, down from its previous view of $3.75-$4.05. "Argentina will continue to be an area of risk so long as the labor unrest and political uncertainty loom around the oil and gas industry in that country," cautioned CEO John "Jay" Glick. Of course, when you couple the short-term nature of the labor strikes with the stock's single-digit forward P/E, Lufkin might be an attractive value opportunity for patient Fools.

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The article Why Lufkin Shares Got Crushed originally appeared on Fool.com.

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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