Knowles Shares Plunge 9% As Third-quarter Outlook Slashed

(RTTNews) - Shares of Knowles Corp. (KN) plunged more than nine percent in extended trading on Thursday after the maker of acoustic and transducer products slashed its earnings and sales guidance for the third quarter, citing temporary interruption of production and shipments of one new version of MEMS microphone.

The company is scheduled to report financial results for the third quarter on October 27.

"Late in the third quarter, production and shipments of one new version of our MEMS microphone was placed on temporary hold due to a low level defect that was discovered during the ramp up of the microphone product," President and CEO Jeffrey Niew said in a statement.

Itasca, Illinois-based Knowles, which was spun-off from Dover Corp. (DOV) in early March, slashed adjusted earnings guidance for the third quarter to a range of $0.36 to $0.40 per share from the prior outlook in the range of $0.45 to $0.52 per share.

The current guidance includes a $0.02 discrete tax expense, primarily related to certain foreign withholding taxes.

On average, five analysts polled by Thomson Reuters expect the company to report earnings of $0.48 per share for the quarter.

The company also now projects sales of $301 million for the quarter, down from the earlier forecast for sales to be between $310 million and $330 million. Four Wall Street analysts have a consensus revenue estimate of $319.28 million for the quarter.

The company also said adjusted gross profit margin is now expected between 30 and 32 percent, down from the previous guidance of about 32 to 34 percent.

The company attributed the cut in guidance to the temporary interruption in production and shipments of one new version of MEMS microphone due to a low level defect. The company said the root cause for the defect has been identified and that corrective actions are in place. It is now working to return to production and resume shipments for the product.

However, the company added that the interruption has negatively impacted revenues for the quarter by more than $20 million due to lower than expected unit production and shipment.

"While we're disappointed with this temporary interruption of production and shipments, we believe this to be an isolated issue and expect to remain the market leader in MEMS microphones," Niew added.

Knowles was created in early March 2014 when Dover spun-off certain of its communication technologies businesses into a standalone, publicly traded company. It makes acoustic components, including MEMs microphones, speakers, receivers and transducers, as well as communication infrastructure components.

KN closed Thursday's regular trading session at $24.21, down $1.04 or 4.12% on a volume of 1.71 million shares. The stock plunged a further $2.21 or 9.13% in after-hours trading.