Here’s why Electro Optic Systems (ASX:EOS) shares are frozen today

An impending earnings downgrade has EOS shares on the ice…

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A dollar sign embedded in ice, indicating a share price freeze or trading halt

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The Electro Optic Systems Holdings Ltd (ASX: EOS) share price is frozen on Monday. This follows the defence contractor submitting a request to the ASX to halt the trading of its securities ahead of several announcements.

At the time of writing, the company’s shares are stuck at $3.61 apiece. This positions the Electro Optic (EOS) share price ~48% below its 52-week high of $6.92.

Let’s take a closer look at what is expected to be announced.

EOS shares dealt earnings downgrade

Today is an eventful day for the trading of EOS shares, with not a single share being exchanged. Though, the lack of activity is not due to disinterest. Instead, the defence contractor requested its shares be placed in a trading halt prior to the market opening this morning.

According to the release, the trading halt has been entered prior to the announcement of a few various matters. This includes a downgrade to the company’s earnings guidance, an update pertaining to a significant contract payment, and the status of fundraising efforts for its subsidiary SpaceLink Corporation.

Firstly, the earnings downgrade comes at a time when supply chain disruptions have wreaked havoc on EOS’ typical delivery. As a result, the company downgraded its revenue guidance in 2020 from 70% year-on-year growth to only 25%. It appears this trend is continuing now on Electro Optic’s bottom line of the profit and loss statement.

Secondly, shareholders can expect EOS shares to remain halted until either the company releases these announcements or the commencement of trading on 27 October 2021.

Increasing pressure

Unfortunately, this not-so-positive news continues the downward trend playing out for EOS. As a result, sentiment towards the Aussie defence company is largely negative. In fact, it is commonly featured in the 10 most shorted ASX shares — with it placing fifth last week at 8.7% short interest.

EOS shares are down 37.8% over the last 12 months.

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Motley Fool contributor Mitchell Lawler owns shares of Electro Optic Systems Holdings Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Electro Optic Systems Holdings Limited. The Motley Fool Australia owns shares of and has recommended Electro Optic Systems Holdings Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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