The Q2 Earnings Season Shooting Gallery

by Tom Taulli | July 27, 2012 3:12 pm

The Q2 Earnings Season Shooting Gallery

This earnings season can be summed up in just one word:

Brutal.

A big factor for the wreckage has been the slowing of the global economy — something that’s not just showing up on the past quarter’s bottom lines, but also in falling forecasts. But more importantly, despite plenty of warning[1] that things were going to be ugly, investors have been turning on a dime the second bad earnings news is churned out.

You know things are bad when even Apple (NASDAQ:AAPL[2]) can’t catch a break. Normally an earnings-season fireworks display, Apple wasn’t able to show enough growth earlier this week — a 21% improvement just didn’t cut it — and the Street gave Apple a decent 4% haircut.

Luckily for Apple, that was the worst of it. A number of other stocks have taken considerable baths in the past couple weeks on bad, middling … even good news. Here’s a look at a few companies investors were quick to pull the “sell” trigger on:

Starbucks (NASDAQ:SBUX[3]): Starbucks’ second-quarter report was a bit of a shocker. It didn’t miss by much — earnings of 43 cents per share and improved revenues of $3.3 billion were shy of estimates for 45 cents and $3.33 billion — but fourth-quarter guidance was weaker than forecasts given a month ago, too. Starbucks is feeling the pain of the global slowdown, especially in Europe. And while that’s a well-known theme at this point, investors have been no more merciful, sending SBUX down by about 9% Friday.

Facebook (NASDAQ:FB[4]): Investors already were bracing for bad news ahead of Facebook’s Thursday earnings report. And they got it — sort of. The earnings report itself[5] was not that bad. Facebook reported a 32% increase in revenues to $1.18 billion, it suffered an expected loss of $157 million, and EPS of 12 cents were right on line with Street expectations. But Facebook provided no guidance for the next quarter or the full year — a troubling absence when investors remain concerned about FB’s ability to monetize its rapidly growing mobile business. As a result, the stock was off almost 12% Friday.

Chipotle Mexican Grill (NYSE:CMG[6]): Growth doesn’t last forever — and when it starts to slow, investors get jittery. Such was the lesson taught to Chipotle when it reported its second-quarter earnings last week. Revenues climbed by 21% — and that was put to shame by earnings that were 61%. But those results weren’t what Wall Street wanted — specifically, revenues fell about 15 million shy of estimates — and CMG shares plunged 22%[7].

Zynga (NASDAQ:ZNGA[8]): Social gamemaker Zynga came public in December 2011, and since then, it has been a wild ride, including a continuous steep plunge for the past couple months. The cap came Wednesday when Zynga announced it had swung to a loss[9] and dropped full-year guidance by roughly 75%, sending the stock plunging 38% in Thursday trading. The company gets most of its money by selling digital items in its social games. While it is a billion-dollar business, Zynga has come under pressure as it has failed to produce new breakout games and is struggling with the transition to mobile

Green Dot (NYSE:GDOT[10]): Green Dot, a pioneer of the pre-paid debit-card market, was being taken to the woodshed Friday on disappointing earnings and guidance. While revenues were up a healthy 19% from the year-ago period, earnings actually fell 17% amid pricing pressures caused by growing competition, and adjusted EPS of 35 cents came in 3 cents under the consensus mark. Guidance is what really killed GDOT, though — the company reduced full-year earnings forecasts of $1.65 to $1.70 to a range of $1.29 to $1.32. Investors headed for the exit aisles, sending GDOT shares down roughly 60% near the end of Friday trading.

Tom Taulli runs the InvestorPlace blog IPOPlaybook[11], a site dedicated to the hottest news and rumors about initial public offerings. He also is the author of “All About Short Selling”[12] and “All About Commodities.”[13] Follow him on Twitter at @ttaulli[14]. As of this writing, he did not own a position in any of the aforementioned securities.

Endnotes:
  1. plenty of warning: http://investorplace.com/2012/07/bracing-for-an-ugly-earnings-season/
  2. AAPL: http://studio-5.financialcontent.com/investplace/quote?Symbol=AAPL
  3. SBUX: http://studio-5.financialcontent.com/investplace/quote?Symbol=SBUX
  4. FB: http://studio-5.financialcontent.com/investplace/quote?Symbol=FB
  5. earnings report itself: http://investorplace.com/ipo-playbook/facebook-suffers-another-debacle/
  6. CMG: http://studio-5.financialcontent.com/investplace/quote?Symbol=CMG
  7. CMG shares plunged 22%: http://investorplace.com/2012/07/chipotle-stock-crash-was-overdue-cmg/
  8. ZNGA: http://studio-5.financialcontent.com/investplace/quote?Symbol=ZNGA
  9. announced it had swung to a loss: http://investorplace.com/ipo-playbook/its-painville-for-zynga-znga-earnings-facebook/
  10. GDOT: http://studio-5.financialcontent.com/investplace/quote?Symbol=GDOT
  11. IPOPlaybook: http://investorplace.com/ipo-playbook/
  12. “All About Short Selling”: http://www.amazon.com/All-About-Short-Selling/dp/0071759344/ref=sr_1_1?s=books&ie=UTF8&qid=1302184310&sr=1-1
  13. “All About Commodities.”: http://www.amazon.com/All-About-Commodities/dp/0071769986/ref=ntt_at_ep_dpi_10
  14. @ttaulli: https://twitter.com/ttaulli

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