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McCoy gets whacked

Advance warning of a bad fourth quarter leads to a double-digit sell-off - but is that a sign of things to come or just a golden opportunity to get its shares at a discount?

When he was younger, Max Fawcett wanted to make a mint in the markets. Now as the managing editor of Alberta Venture he gets to write about them. Close enough, right? He can be reached at mfawcett@albertaventure.com

Feb 11, 2014

by Max Fawcett

 

McCoy (TSE:MCB) shares are down big this morning after the company warned that its 4Q13 results would be a disappointment. As Canaccord noted this morning, “In approximate order of relative impact, the company cited four reasons for its Q4/13 challenges: i) corporate ERP implementation, which diverted core resources away from core operations; ii) the delayed delivery of a large power tong order due to extensive engineering requirements and ERP-related resource constraints; iii) warranty provisions related to unidentified product quality issues; and iv) start-up costs related to the establishment of international support locations. Concurrent with this release, McCoy reported that demand ‘remains strong in offshore and international markets’ and that its commercialization of its weBUCK and weHOLD remains on-track.”

And while the sell-off has been a steep one and the results a disappointment, Canaccord still thinks the long-term thesis – one that relates to the company’s exposure to growing international demand for its products – remains intact. It knocked its price target down by a dollar to $7.75, but still thinks it’s a worthwhile investment. “We believe investors with a longer-term view should take advantage of share price weakness related to this earnings warning to build positions,” it said.

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