Shares of industrial equipment-maker Colfax Corporation (NYSE: CFX) fell as much is 21% in early trading Monday. Colfax reported its Q3 2017 earnings Monday morning, wherein pro forma profits of $0.42 per share net Wall Street's expectations, but sales of $844.5 million fell far short of analyst predictions for a $913 million quarter.
After rebounding somewhat, Colfax stock is still down 13.7% as of 11:15 a.m. EST.
The good news is that, objectively speaking, Colfax's report actually wasn't that bad. Sales may have missed Wall Street estimates, but Colfax's revenues were still up more than 10% year over year. Calculated according to GAAP accounting principles, Colfax earned net income of $0.37 per diluted share, up 61% in comparison to last year's Q3.
Guiding for the rest of this year, Colfax reaffirmed its prior earnings guidance of between $1.65 and $1.75 in "adjusted net income per share." Actual GAAP profits should range between $1.34 and $1.44 per share. Both of these figures include the anticipated $0.25 to $0.28 per share profit contributed by Colfax's fluid handling business, which is currently up for sale. Additionally, Colfax expects to report a "gain on the divestiture" of this subsidiary.
Colfax's valuation is in flux, with guided profit incorporating earnings from a division that Colfax will soon no longer possess -- but not including the anticipated proceeds from selling that division. Currently priced at 25.7 times trailing earnings, Colfax stock looks expensive at present. Excluding the gains from the coming sale, I expect it will look even more expensive after restructuring.
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