Comtech Telecommunications Corp. (CMTL:US), an electronics communications company, fell the most in two years after lowering its profit forecast in response to the threat of federal budget cuts and tax increases.
Shares of the Melville, New York-based company declined as much as 13.5 percent for the biggest intraday drop since Dec. 9, 2010. They traded at $23.74, down 8 percent, at 11:04 a.m. in New York. The stock (CMTL:US) has dropped 17 percent this year.
Comtech yesterday forecast profit for fiscal 2013 at $1.26 to $1.34 a share, down from $1.40 to $1.48. The company also forecast profit in its second quarter ending Jan. 31 at 10 to 12 cents a share. Analysts had predicted 34 cents a share, the average of five estimates compiled by Bloomberg.
Chief Executive Officer Fred Kornberg blamed the company’s lower guidance on the federal government’s so-called fiscal cliff of tax increases and automatic spending cuts set to take effect in the beginning of next year.
“Although our long-term growth plans have not changed, we believe that the U.S. government’s failure to resolve the ‘fiscal cliff’ has resulted in increased uncertainty throughout our customer base,” he said in a statement. “As such, we have adjusted our fiscal 2013 business outlook and updated our guidance accordingly.”
The company gets about half its revenue from the U.S. government, according to a Securities and Exchange Commission filing. It provides satellite communications gear and other technology products to the Defense Department.
Comtech said yesterday that its first-quarter profit was $9.5 million, or 45 cents a share, compared with $12.6 million, or 47 cents a share, in the year-earlier period. Analysts had predicted earnings of 29 cents a share, the average of five estimates compiled by Bloomberg.
“Stock likely to face pressure today,” Joseph Nadol, an analyst at JPMorgan in New York, wrote in a note to clients. “Q1 was fine, but the tough outlook will likely be the primary driver of the stock today.”
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