Event: Filtration products company, Polypore Corporation (PPO) rocked followers yesterday with news that it would earn substantially less income in the third quarter than current estimates. Shares tanked immediately after the news falling some 13% in the first hour of trading. No worries, companies are playing the reduce expectations game lowering the bar for earnings that then can be more easily met. As such this story became a bad news is good news and shares jumped higher. That move erased prior losses and shares closed higher for the day. Those gains have stuck on Wednesday making one wonder where does the market go from here?
Analysis: Polypore is not the first company to reduce expectations for the current quarter. Previously we saw Intel do the same. The reductions should come as no surprise. Fear in the market is high as are worries over a possible recession. Why not use the environment to lower the bar if you will. Shares of Polypore have been falling steadily over the last year. Perhaps this is the worst of it for the company.
Action: No action to take on this one, but with the company missing estimates in 2 of the last 4 quarters, the mid-quarter guidance reduction perhaps sets the table for an earnings surprise. Keep an eye on this one.