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 Standard Motor Products were sputtering out today, falling as much as 18% after the company delivered a disappointing earnings report.
So what: The maker of replacement auto parts turned in a per-share profit of $0.70, short of estimates at $0.75, while revenue also missed as sales increased 0.4% to $270.1 million, well off the consensus at $280.8 million. Management blamed the cool and wet spring for slow sales in its Temperature Control department in April and May, but noted that they recovered in June. Still, gross margin improved nearly 300 basis points as recent cost-cutting efforts have paid dues, and management said it was happy with the quarter aside from the Temperature Control problems. That segment makes up about a third of sales, and fell 7%.
Now what: Considering that Standard Motor's results would have been essentially in line with estimates had Temperature Control sales been flat, I wouldn't get too worked up about the miss. The improvement in gross margins is certainly promising, and bodes well for continued growth as per-share profits rose 17% in the quarter. Today's report should be just a speed bump on the road toward further growth.
Looking for even more opportunities in automotive stocks? Just look at China. It's already the world's largest auto market -- and it's set to grow even bigger in coming years. A recent Motley Fool report, "2 Automakers to Buy for a Surging Chinese Market," names two global giants poised to reap big gains that could drive big rewards for investors. You can read this report right now for free -- just click here for instant access.
The article Why Standard Motor Products Shares Dropped originally appeared on Fool.com.
Fool contributor Jeremy Bowman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks 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 Motley Fool has a disclosure policy.