Fabrinet (FN) reported fiscal third-quarter results after Monday's closing bell, and on paper, they looked great. The company beat both earnings and revenue estimates, with CEO Seamus Grady calling the quarter "exceptionally strong." But the stock still got clobbered, dropping nearly 11% in extended trading. Let's dig into the numbers.

The Numbers

Fabrinet posted quarterly earnings of $3.72 per share, topping the consensus estimate of $3.56 by 4.49%. Revenue came in at $1.21 billion, up from $871.8 million a year ago and ahead of the $1.18 billion analysts were looking for. That's a 39% year-over-year revenue jump — not too shabby.

CEO Seamus Grady said in a statement: "Our third quarter was exceptionally strong, delivering record financial results that exceeded our guidance ranges. Growth was supported by numerous ongoing and ramping programs that continue to provide meaningful tailwinds."

Guidance

For the fourth quarter, Fabrinet expects adjusted EPS of $3.72 to $3.87, versus the $3.78 analyst estimate. Revenue is forecast between $1.25 billion and $1.29 billion, compared to the $1.26 billion consensus. So guidance is roughly in line, maybe a hair above.

Why the Drop?

So why did the stock fall? It's a classic case of "buy the rumor, sell the news." Fabrinet shares had rallied significantly ahead of the report, and even a beat wasn't enough to keep the momentum going. Sometimes, good news is already priced in. The stock closed Monday at $717.80 before the earnings release, so the drop to $640 in extended trading represents a sharp reversal.

Investors might also be concerned about sustainability: can Fabrinet keep up this torrid growth pace? The guidance suggests a slowdown in sequential growth, which may have spooked some traders. But for a company growing revenue 39% year-over-year and beating estimates, the sell-off seems harsh.