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Defense firm Force Protection, Inc. (NASDAQ: FRPT; option chain) has tumbled more than 4% to slip below the $5 level today, despite reporting a stronger-than-expected quarterly profit last night. The company raked in a fourth-quarter profit of $11.7 million, or 17 cents per share, even as revenue tumbled 46% to $239.1 million. Ahead of the report, analysts surveyed by Reuters were expecting a profit of 11 cents per share on $211.7 million in revenue.
"The decline in revenues was primarily the result of lower revenues recognized on shipments of vehicles due to the substantial completion of production under the [Mine-Resistant Ambush Protected] program," said FRPT in a statement. "However, revenues related to the company's service and support business increased to $97.7 million," more than triple the year-ago figure of $27.5 million.
Despite the apparently solid results, Wall Street is reacting rather unenthusiastically to FRPT's earnings. The equity remains stifled beneath resistance from its 10-week moving average, which has capped its progress since late February.
Today's sell-off could indicate that investors were expecting a stronger quarterly report from the South Carolina-based defense firm. In fact, during the past 10 days, traders on the International Securities Exchange (ISE) and the Chicago Board Options Exchange (CBOE) have bought to open 7 times more call options than puts.
In the front-month series, which is due to expire on Friday, traders have set their sights on the 5 strike. This call option is home to peak open interest of 2,794 contracts in the March series. If FRPT closes below this region, it could result in another wave of selling pressure hitting the shares.
Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.
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