What: Shares in leading infrastructure and environmental services provider Cardno Limited (ASX: CDD) have taken shareholders on another wild ride this morning with the stock plunging around 25% in the opening minutes of trade before recovering to be down about 15% at midday.
It's certainly not the first time the company has sent shareholders on a scary decent with the stock sinking from $3 to below $2 in late November 2015. Cardno's share price has now lost over 70% in the past 12 months.
So What: The cause of today's sell-off was the ASX release of a 'Market Update and FY16 Guidance' by the group.
The announcement stated that Cardno now expects financial year (FY) 2016 earnings before interest, tax, depreciation and amortisation (EBITDA) of between $40 million and $45 million. This is a significant reduction on prior guidance which forecast an EBITDA range of $65 million to $70 million.
Equally concerning was news that Cardno may need to undertake a capital raising to ensure the company stays within its bank leverage covenant.
Now What: Mining stocks such as BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO) have enjoyed a rally recently. Both companies have experienced share price gains of around 20% in the past month.
Likewise, oil and gas stocks have benefited from the recent rise in the oil price. Santos Ltd's (ASX: STO) share price has also risen around 20% in the past month.
The same gains haven't flowed through to companies exposed to the mining services sector however. For example, shares in Orica Ltd (ASX: ORI) which is a major provider of explosives to the mining sector are flat over the past month.
Today's announcement by Cardno that its business continues to face headwinds from its exposure to mining and oil and gas sectors "which continue to operate at materially lower levels than has been historically the case" should act as a reminder to investors. Dangers are still present across the commodity sector and caution should continue to be exercised despite the apparent "value" available.
