Lower-than-expected profitability in 2024 isn’t the only reason investors are avoiding the stock this week.
With orders coming in lower than expected, management for advanced materials company Materion (MTRN 5.04%) sees a less profitable 2024 than it had initially expected. As a result, the company downwardly revised its 2024 guidance, motivating investors to trim — or exit completely — their positions. Adding to investors’ concerns, an analyst provided a more bearish outlook on Materion stock during the week.
According to data provided by S&P Global Market Intelligence, shares of Materion are down 10.7% from the end of trading last Friday through the market’s close on Thursday.
The sources of investors’ distress
In its second-quarter 2024 financial report, Materion management espoused optimism for the year, projecting 2024 adjusted earnings per share (EPS) of $5.60 to $5.90 — the midpoint of which represented a 2% increase over that which it reported in 2023.
But the bullish outlook didn’t last long. On Tuesday, Materion revealed in a regulatory filing that it was now guiding for 2024 adjusted EPS to $5.20 to $5.40 due to a slower intake of orders during the second half of 2024 than it had previously expected. In response to the current environment, management noted that it “has implemented additional cost control actions to mitigate the impact of lower value-added sales…”
Expecting less upside for shares of Materion, Seaport Research cut its price target on the company’s stock to $135 from $150.
Is now the time to avoid Materion stock?
Despite the recent sell-off, shares of Materion still don’t seem attractively priced, trading at 26.8 times trailing earnings. As a company with strong exposure to the semiconductor industry, those looking for comparable exposure may want to consider alternate opportunities instead of rushing to pick up Materion stock.
Scott Levine 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.