After having the best single day stock performance in its company history (+32.36%) on Friday, CFC closed down 2% today (after trading down as much as 5% intraday) as investors take profits and question the likelihood that the company's guidance will be accurate.
The reason for Friday's sharp gain was attributed to the company forecasting a return to profitability in the fourth quarter. However, a look at prior guidance from the company shows that their forecasts haven't exactly been reliable. For example, on July 24th the company lowered full year guidance, but they were still forecasting a profit of between $2.70-$3.30 per share. On Friday, the company reported a loss for the third quarter of -$2.85 per share, and even if they meet the high end of their Q4 guidance, full year EPS will be a loss of 57 cents per share, which is nowhere near the $2.70 they were predicting back in July.
If CFC couldn't accurately predict their short-term results three months ago, what makes investors think they can do so now? While we realize that the last three months were extremely volatile, the market hasn't exactly settled down and become more predictable.
Another area of peculiarity is in the CEO's stock sales. Several months ago, when asked by a CNBC reporter why he has sold so much stock in the company, Angelo Mozilo's response included: “…why am I selling? The reason I’m selling is that it is the majority of my net worth, and I have a big family, nine grandchildren, five children. I have a lot of education to pay for, so I have a lot of obligations…”
Education? Now we realize boarding schools, college and graduate schools are getting increasingly expensive, but $132 million in stock sales over the last year to cover education expenses seems a little excessive.