Why Keurig Green Mountain Inc. (GMCR), Viacom, Inc. (VIAB) and Fitbit Inc. (FIT) Are 3 of Today’s Worst Stocks

Advertisement

Between a wave of disappointing earnings, slashed outlooks, and uncertainly surrounding tomorrow’s employment report for July, traders collectively decided the best course of action on Thursday was lightening up exposure to stocks. The S&P 500 closed 0.78% lower, at 2,083.56.

Why Keurig Green Mountain Inc. (GMCR), Viacom, Inc. (VIAB) and Fitbit Inc. (FIT) Are 3 of Today's Worst StocksIt could have been worse, though, and was worse for owners of Viacom, Inc. (NASDAQ:VIAB), Fitbit Inc. (NYSE:FIT) and Keurig Green Mountain Inc. (NASDAQ:GMCR). These three names led the bearish charge. Here’s why.

Fitbit (FIT)

A blowout quarter still wasn’t enough to satisfy Fitbit investors.

During its second fiscal quarter of 2015 and its first-ever quarter as a publicly traded company, Fitbit earned 21 cents per share on $400 million in sales. Not only was the top line three times better than the year-ago revenue figure, this year’s sales and earnings handily topped expectations of a profit of 8 cents per share of FIT and sales of $319 million.

So why the 13.8% tumble from FIT shares? Slowing sales growth and an outlook that calls for diminishing rather than widening margins.

Analysts still like the company and the stock, however. R.W.Baird’s William Power summed up this bullishness best by saying:

“Fitbit reported strong overall Q2 results, with revenue and EPS well above forecasts. Q3 and 2015 revenue guidance also looked strong, though EPS guidance suggests much higher costs, which we believe includes higher marketing costs coupled with conservatism. We remain positive on the overall trends and opportunity.”

Power also raised his price target on FIT from $52 to $54.

Viacom (VIAB)

For the second day in a row, shares of film and television company Viacom fell sharply, with Thursday’s 13% tumble from VIAB being directly spurred by disappointing quarterly results released this morning.

The company earned $1.47 per share on $3.06 billion in revenue. Analysts, however, were looking for a bottom line of $1.48 per share of VIAB and revenue of $3.25 billion. Sales were off 11% on a year-over-year basis.

Nielsen data reports that viewership of MTV and Comedy Central — both owned by Viacom — is down by double-digits for the current season, which jibes with last quarter’s slumping results.

Keurig Green Mountain (GMCR)

Last but not least, Keurig Green Mountain investors were seeing nothing but red today, as GMCR shares plunged a stunning 30% following the company’s third-quarter results and subsequently slashed sales guidance.

The company managed to top earnings estimates of 78 cents per share for the prior quarter, boasting a bottom line of 80 cents per share of GMCR. Keurig Green Mountain, however, missed Q3 revenue estimates of $1.04 billion with its top line of only $970 million. Revenue in the brewer and accessories segment fell a total of 26% on a year-over-year basis, with its new Keurig 2.0 not achieving the sales traction initially hoped for.

The nail in the GMCR coffin was driven by the sales outlook for the current quarter. The company now estimates a profit of somewhere between 70 cents and 75 cents for fourth fiscal quarter of 2015, but analysts had been expecting an average of 97 cents per share.

Sterne Agee CRT analyst April Scee wrote of the Keurig Green Mountain results:

“After 3 Qs of negative revisions, Keurig still targets mid-teens EPS growth longer-term, but admits this requires decreased competition and increased margin flexibility. On margins, a new 3-yr $300m productivity program was announced. However, competitive activity is likely to remain high given excess capacity. Mix shift toward lower margin licensed pods could continue as well. Keurig lowered Sept-Q and F16 assumptions, but the reset may not be enough despite several downgrades and lowered investor expectations.”

GMCR stock is now down 60% for the year-to-date.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.

More From InvestorPlace


Article printed from InvestorPlace Media, https://investorplace.com/2015/08/keurig-green-mountain-inc-gmcr-viacom-inc-viab-fitbit-inc-fit-3-todays-worst-stocks/.

©2024 InvestorPlace Media, LLC