Kirschner Medical Corp. said yesterday that its third-quarter profits will be lower than expected because of problems in its European operations and that an audit of the Spain-based division would cause a delay in reporting Kirschner's quarterly results.
The news met with a bad reception on Wall Street, where the overall market was already in a surly mood that pushed the Dow Jones industrial average down 120 points. Kirschner fell $5 a share to close at $13.75.
"My interpretation is that the announcement does not result in a significant change in the outlook" for Kirschner, said Lawrence Marsh, an analyst who follows the maker of medical equipment for Wheat First Securities Inc. in Richmond, Va. "I think the market is overreacting."
Kirschner said that its U.S. operations were profitable during the quarter but that the European division incurred a loss, which Mr. Marsh said is normal during the third quarter because many European businessmen take extended summer vacations.
The company said it confirmed the loss in an audit that is under way as part of the company's plan to restructure in order to recover from big losses in the last two years.
Kirschner Chief Executive Officer Scott Harrison couldn't be reached for comment yesterday.
Mr. Marsh said that he thinks the stock went down so much because Kirschner has a history of surprising its stockholders with unanticipated bad news, prompting fears that the actual earnings report will be worse than yesterday's announcement indicated. "The market has taken a sell-first, ask-questions-later approach," he said.
But the analyst thinks the earnings will be close to his original expectation of 10 cents a share, up from 8 cents in the third quarter of 1990.