Here’s why the Electro Optic (ASX:EOS) share price is down 7% today

Electro Optic share price has declined in today’s trading, after the company announced that it will miss its previous earnings guidance.
The post Here’s why the Electro Optic (ASX:EOS) share price is down 7% today appeared first on The Motley Fool Australia. –

falling asx share price represented by investor looking shocked

Electro Optic Systems Holding Ltd (ASX: EOS) shares are falling lower today after the company announced short-term impacts will cause it to miss its previous FY20 earnings guidance. At the time of writing, the Electro Optic share price is down 6.79% to $5.90.

What’s pushing the Electro Optic share price lower?

In October, the defence, space, and communications company had announced that underlying earnings before tax (EBIT) for the full FY20 would come in the range of $20 to $30 million.

Today, the Electro Optic share price is plummeting lower after the company reported, on 18 December, it was advised around 12 days of December shipments would not be received by its foreign customer before 31 December 2020. This is the cut off date to enable Electro Optic to recognise the revenue in FY20.

The company says the specific causes of the disruption are international air freight bottlenecks, and a fall in import license activity in the offices of the customer’s foreign government.

Electro Optic says that in a normal year, this event would be unremarkable, but this year the December shipments exceeded any other month as delivery momentum increases.

The heavy skew of revenue and profits to quarter four, and specifically December, has made the outcome for the full year unusually dependent on activity in the final weeks of the year. 

The affected revenue, for which all costs have already been incurred in 2020, may exceed $20 million. This revenue will now be shifted into quarter one of 2021 along with associated profit.

However, the deferral of revenue recognition into FY21 will not affect any prior cash flow assumptions by the company.

The company also said that the recent strengthening of the Australian dollar to 76 cents, compared to 72 cents at the time of the last guidance update, meant there would be an impact to EBIT. This is because its manufacturing costs are largely Australian dollar denominated, versus revenue which is largely in US dollars. 

Recent activities

Last week, the company announced it was awarded a $34.4 million contract by the Commonwealth of Australia. The release said the government will use its C4 EDGE solution to provide combat radios, satellite terminals, cryptography, networking middleware, command applications, batteries, and power management into a coherent system.

In November, Electro Optic also advised it would build and operate a medium earth orbit (MEO) satellite constellation, which it expected to launch and operate in 2024 – producing a positive operating cash flow. The company advised this satellite communications system will be optimised for defence and government customers.

About the Electro Optic share price

Electro Optic is a leading Australian technology company operating in the space and defence markets. Formed in 1983, it became a publicly-traded company on the Australian Stock Exchange in 2002.

The Electro Optic share price has lost around 20% in 2020, after dropping by as much as 60% in March. At the current level, the Electro Optic share price has a mountain to climb to reach its 52-week high of $10.80.

The company commands a market capitalisation of $947 million.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

See The 5 Stocks

*Returns as of June 30th

More reading

Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Electro Optic Systems Holdings Limited. The Motley Fool Australia has recommended Electro Optic Systems Holdings Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Here’s why the Electro Optic (ASX:EOS) share price is down 7% today appeared first on The Motley Fool Australia.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!