Why OMNOVA Solutions Shares Dropped and Then Recovered

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 chemical-maker OMNOVA Solutions dropped as much as 11% today before recovering nearly all those losses, after it reported earnings this morning.

So what: Adjusted earnings per share dropped to $0.07 from $0.13 a year ago, badly missing estimates of $0.14 a share. EPS was also negatively affected by a $0.04 LIFO expense. CEO Kevin McMullen explained, "The fourth quarter results were negatively affected by weakness in global demand, particularly in Europe and in the North American paper industry. However, he also noted several structural improvements in the company's portfolio, and said he expects business to improve by the second quarter.

Now what: Investors probably saw the early morning losses as a buying opportunity. OMNOVA figures to recover along with the overall economy as it's particularly sensitive to housing, durable goods, and oil and gas exploration, sectors that appear to be improving. Nobody likes an earnings miss, but as usual, the outlook seems to be more important in the eyes of the market than the past quarter's results.

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The article Why OMNOVA Solutions Shares Dropped and Then Recovered originally appeared on Fool.com.

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