Why the CIMIC share price crashed 17% lower today

Here's why the CIMIC Group Ltd (ASX:CIM) share price crashed lower this morning…

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The CIMIC Group Ltd (ASX: CIM) share price has been crushed this morning following the release of its half year results after the market close on Wednesday.

In early trade the international contractor's shares fell a massive 17.5% to a 52-week low of $37.70.

a woman

Why is the CIMIC share price crashing lower?

Investors have been quick to hit the sell button following the release of a very weak first half result.

In the first half CIMIC reported a net profit after tax of $367 million. This was up 1% on the prior corresponding period and well short of the market's expectations.

The weak result was driven by a reasonable decline in construction revenue and margins, which offset a positive performance from its mining services business.

According to a note out of Goldman Sachs, CIMIC's profit result was 7% below its estimates.

Whilst that was bad, the broker appeared especially disappointed with the company's cash flow.

It said: "EBITDA cash flow conversion was surprisingly low at 52% and operating cash flow free was just A$33mn after net capex of A$327mn."

One positive, though, is the company's net cash balance of $1.4 billion at the end of the period.

Goldman believes this provides "capacity for the company to consider capital management initiatives such as further share buy backs (CIM has an approved but inactive on-market buyback of up to 10% of shares outstanding), bolt-on M&A, and/or equity investments in PPP projects (such as the recent Cross River Rail win)."

But that isn't enough to make the broker positive on CIMIC just yet. After revising its earnings forecasts lower, it has retained its neutral rating and downgraded its price target on the company's shares to $45.00.

Elsewhere, equity analysts at Macquarie Group Ltd (ASX: MQG) have retained their neutral rating and cut the price target on CIMIC's shares to $43.80.

Also falling heavily today was the Superloop Ltd (ASX: SLC) share price. It continued its slide and dropped 15% to hit a 52-week low of 90 cents this morning following the release of its chairman's letter.

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of SUPERLOOP FPO. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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