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.

Stay connected with OMNOVA. Add the stock to your Watchlist by clicking here.

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

Fool contributor Jeremy Bowman and The Motley Fool have no position in any of the stocks mentioned. 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 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.