Shares of environmental and engineering services business Cardno Limited (ASX: CDD) hit a high of $3.51 on Monday, but have since shed nearly a third of their value to trade at just $2.36, and there are signs it could have even further to fall.
The stock hit a new 12-year low during yesterday's session at $2.18, down from a 52-week high of $7, after issuing a severe profit warning on Wednesday which resulted in a 27% single-day loss. The company said that it expects full-year net profit after tax (NPAT) to fall between $48 million and $51 million due to a weak second half, the mid-point of which would represent a 36.6% decline on last year's $78.1 million profit.
To make matters worse, Cardno was also forced into a $200 million write-down on its US and Ecuadorian investments which it blamed on a slowdown in demand for oil and gas services globally (with oil prices expected to fall, I expect this will be an ongoing issue).
A number of financial firms, including Macquarie, Deutsche Bank, Morgans and UBS, have revised their estimates as a result, with UBS maintaining the most bearish price target of just $1.90 – down 19.5% from Thursday's closing price.
Indeed, the warning issued by Cardno is just another sign of how tough conditions are getting for mining services companies. Other companies within the sector, including Bradken Limited (ASX: BKN) and Monadelphous Group Limited (ASX: MND), have also fallen dramatically with more and more operations being taken in-house by the miners. Investors should take this as a clear sign to remain clear of the sector altogether.
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