Why Federal-Mogul Shares Fell ... Again
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: The pain's not over yet for auto-parts maker Federal-Mogul (NAS: FDML) . A day after shares fell 11% on a bad earnings report, the slide continued as the stock plummeted as much as 13% today.
So what: After coming up short on earnings and revenue, both of which declined from a year ago, Federal-Mogul said it will cut about 400 temporary jobs on top of another 400 it had recently eliminated. "We are reducing head count and production schedules at several sites, while at the same time ensuring that we maintain readiness to respond when the European market returns to normal levels," said Co-CEO Rainer Jueckstock. The overall weakness in Europe has been killing the manufacturer, as a small increase in North American sales was not enough to counteract the 7% drop in revenue across the Atlantic.
Now what: On Friday, I suggested that Federal-Mogul's stock was likely to fall further, and today's drop only confirms that concern. With recessions and high unemployment raging on, the eurozone seems a long way away from getting out of the woods, and Caterpilllar today became one in a long line of global industrial companies to cut its forecast, signaling continued weakness for cyclicals. As Federal-Mogul is dependent on a similar supply chain of vehicle makers, Caterpillar's cut is just one more reason to avoid this struggling manufacturer.
Want to know when Federal-Mogul starts to rev up? Just add the company to your Watchlist here.
The article Why Federal-Mogul Shares Fell ... Again originally appeared on Fool.com.Jeremy Bowman and The Motley Fool have no positions in the stocks mentioned above. 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.
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