Emeco shares continue to slide after profit downgrade

Earthmoving equipment leasing firm Emeco Holdings (ASX: EHL) yesterday announced a further downgrade to full year profit expectations. Previously management had guided the market towards operating net profit after tax earnings in the range of $40 million to $44 million. Yesterday this guidance was reduced to between $35 million and $36 million.

Given the previous guidance had been issued just two months earlier it is a dramatic revision. In response the market sent the shares down to a new four-year low, closing the day at 30 cents per share. In early trade this morning the company’s shares were down another 3.5 cents to 26.5 cents.

It has been a horrendous start to the year for investors in mining service stocks. Since the start of January, while the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) has gained 2.2%, many mining service stocks have halved in value. For example Emeco has declined by 52.5%, Ausdrill (ASX: ASL) by 62.7% and Macmahon (ASX: MAH) by 54.5%.

Foolish takeaway

There certainly looks to be value on offer amongst mining service stocks. The problem for investors is that no sooner do they adjust their expectations, than they are often required to re-adjust lower still.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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