Thursday November 2, 2:27 pm Eastern Time
GSI stock slides on soft earnings
(UPDATE: Recasts to reflect decline in stock, updates stock price. In U.S. dollars unless noted.)
By Susan Taylor
OTTAWA, Nov 2 (Reuters) - Early advances were stripped from shares of GSI Lumonics Inc. (Toronto:LSI.TO - news) (NasdaqNM:GSLI - news) on Thursday, as analysts' disappointment with third-quarter profits outweighed their enthusiasm for stronger than expected sales.
Gains of up to 5 percent were wiped out in afternoon trading as the stock slipped 14 percent amid analyst reports raising questions about market demand.
The stock shed $2-3/16 to $12-7/16 on Nasdaq and slipped C$2.95 to C$19.40 on the Toronto Stock Exchange.
Needham & Co. analyst Jim Ricchiuti downgraded the stock to a buy from a strong buy on Thursday and cut his stock target to $36 on Nasdaq from $20.
The revision reflects ``expectations that gross margins going forward will be less than expected,'' the report said. The company reported a 40 percent gross margin in the third quarter, just below Ricchiuti's estimate of 41 percent.
That shortfall is tied to delays in shipping two key new products and softening sales in the electronics market, the analyst added.
The analyst also cut his fourth-quarter earnings per share estimate to 18 cents from 21 cents and reduced first quarter estimates to 85 cents from 95 cents.
GSI Lumonics, one of the world's top 3 laser-system manufacturers, reported third quarter net earnings on Wednesday of $6.9 million, or 17 cents a share, on revenues of $97.6 million.
Earnings per share included a 2.5 cent gain from the sale of net assets, which was not included in the consensus estimate of 16 cents per share posted by First Call/Thomson Financial.
BMO Nesbitt Burns analyst Brian Piccioni, who on Thursday upgraded the stock to an outperform from market perform, based on its depressed price, expected net earnings of $7.7 million, or 19 cents per share, on sales of $96.8 million.
Piccioni also cut his share target to C$34.50 on the Toronto Stock Exchange from $42.50 due to a ``decline in market sentiment and a modestly more conservative outlook.''
The stock has whipsawed between a 52-week high of $43-8/16 and a low of $6-3/16 on Nasdaq. On the Toronto exchange, the issue has traded between C$64.00 and C$9.15.
Shares in the company have veered violently with investor sentiment for stocks in fiber-optics firms. While fiber-optic components represent less than 4 percent of GSI Lumonics' revenues, much of the market and analyst attention has been fixed on the red-hot sector.
Analysts added that GSI Lumonics could face slower demand in some of its key markets.
``We remain somewhat concerned by the impact of extraneous factors (namely the weak euro and signs of economic weakness in the U.S.) upon demand for GSI Lumonics' products,'' Piccioni wrote. |
