Shares of Kansas City-based DST Systems lost 12.64 percent of their value Thursday following management’s warning that 2017 could be a tough year for revenue growth.
DST shares fell $14.27 to close at $98.62.
Early Thursday, the company had reported a surge in its third-quarter profits from the sale of its former DST Output operations. The sale brought in $410 million in cash and produced a gain of $340.1 million before taxes.
It left DST with a $273.3 million profit for July, August and September, equal to $8.28 a share. A year ago, the company had earned $75.1 million, or $2.08 a share.
Ignoring the sale and other items, profits were $50.7 million compared with a similarly adjusted profit of $48 million a year earlier, DST’s announcement said.
During a conference call with investors and analysts, however, management cautioned that DST’s financial services business would struggle to grow next year, according to a note Baird Equity Research’s David Koning sent to clients.
Koning told clients to expect the stock to fall by between 3 and 6 percent from management comments that “2017 will be a challenging revenue growth year.” Koning had expected revenues in the company’s financial services business to climb at a low- to mid-single digit rate.
DST executives cited pressures on prices, handling fewer registered investment accounts for mutual fund clients and other issues, his note said.
“We continue to navigate a challenging and competitive environment that is pressuring our outlook,” chief executive Steve Hooley said in the morning earnings announcement. “However, we are confident that, with a number of tools at our disposal, we can successfully continue to win significant business, support our customers with superior solutions and services and remain at the forefront of our industry.”
Revenues in the third quarter were $386.7 million in the quarter, up from $371.6 million a year ago.
DST said it also sold some investments, including some private equity stakes, for $5 million. It spent $75 million buying back its own shares from investors.
The company provides services to financial and health care companies. DST sold its communications business that printed, mailed and otherwise helped companies with their communications with customers.