Why HNI's 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 furniture maker HNI (NYS: HNI) fell 16% today after lowering its third-quarter forecast.

So what: HNI said sales growth would be between 7% and 10%, down 4 percentage points from the previous range. The company also said earnings per share would be similar to last year's number of $0.55 per share. Wall Street had expected $0.64 per share and 11.5% revenue growth.

Now what: The company blamed tough economic conditions for the lower forecast, as businesses didn't buy furniture at the rate previously expected. Investors shouldn't panic over this news, because the company is still growing, and with a 3% dividend there is some protection for investors. I'd like to see the P/E ratio come down from its current level of 24 times, but with revenue ratcheting higher, I think that will flow to the bottom line eventually and the stock will move higher long-term.

Interested in more info on HNI? Add it to your Watchlist byclicking here.

The article Why HNI's Shares Plunged originally appeared on Fool.com.

Fool contributor Travis Hoium has no position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings, or follow his CAPS picks at TMFFlushDraw.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.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.