Why AEP Industries's Shares Popped

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 AEP Industries jumped 18% today after releasing earnings.

So what: The fiscal third quarter ending July 31 saw revenues fall slightly to $291.9 million and net income drop from $12.3 million to $1.8 million, or $0.32 per share. But analysts were only expecting $0.26 per share in earnings so even falling results beat what the market had priced in.

Now what: Resin costs can be very volatile and that's a big driver of the decreased profit year over year. That's a challenge the company will continue to face but a 1% decline in volumes is of even more concern over the long term. With an absence of growth I think paying 38 times fiscal 2014 earnings estimates is too expensive and today's pop is very much overdone.

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The article Why AEP Industries's Shares Popped originally appeared on Fool.com.

Fool contributor Travis Hoium 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.

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