Why GMS Inc. Stock Dropped 16% Today

What happened

Two months ago, GMS Inc. (NYSE: GMS) stock jumped 10% a day after announcing a deal to become the biggest wallboard and suspended ceilings systems distributor in all of North America through its purchase of Canada's WSB Titan. Two months later, GMS is giving back all those gains -- and more -- as investors react to its fiscal Q4 2018 earnings results that were just released.

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GMS shares closed down 16.2%.

So what

What caused the sell-off? Basically, an earnings miss -- but a big one. According to data from Yahoo! Finance, analysts were expecting GMS to report profits of $0.65 per share on sales of $673.4 million for its fiscal fourth quarter. Instead, management reported just $0.24 per share earned on sales of $635.8 million.

Sales increased 3% year over year for the quarter, but profits on those sales declined 30%, thanks in part to charges incurred in connection with the Titan acquisition.

Now what

Despite the disappointing end to the year, GMS grew its sales 8% for the full year, to $2.5 billion, which management said was a new record for the company. Full-year profits were $1.49 per share, a 29% increase year over year, so the company's still doing pretty well profitswise. Analysts expect it will do even better next year, too.

Although management didn't give guidance for fiscal 2019 earnings, Yahoo! data shows that Wall Street is looking for GMS to nearly double its earnings per share, to $3.43, in fiscal 2019 and to grow sales 23%, to $3.1 billion.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.