What started out as a very bearish day didn’t end that badly. After slipping as much as 1.3% into the red after disappointing durable goods orders for August, the S&P 500 bounced back to a loss of only 0.34%, and a close of 1932.24. After a week or so of weakness, the market looks poised for yet another bullish swing.
As for Twitter Inc (NYSE:TWTR), Caterpillar Inc. (NYSE:CAT) and Energy Transfer Equity LP (NYSE:ETE), however, more than a little red ink was used today. Here’s what happened.
Caterpillar Inc. (CAT)
It’s not a particular secret that heavy-machinery maker Caterpillar is facing a headwind. But the scope of that headwind may not have been fully appreciated until today, when the company offered a drastically reduced revenue outlook for 2015.
As of Thursday, CAT is looking for a top line of $48 billion for the full year. That will not only mark the third year in a row that Caterpillar has seen revenue sink, but also falls short of the $48.82 billion analysts had been collectively expecting.
Fanning the flames of the 6%-plus selloff from CAT was an additional announcement that it might be cutting as many as 10,000 jobs in response to a prolonged period of weak demand from the resource mining industry … Caterpillar’s bread and butter.
Energy Transfer Equity LP (ETE)
The good news is, Williams Companies Inc. (NYSE:WMB) is now at least open to the possibility of selling itself to Energy Transfer Equity.
The bad news is, Energy Transfer Equity is going to have to pay dearly to nab WMB, and judging from the nearly 7% intraday pullback and 1% loss (by the close) ETE shares dished out today, investors are none too happy about the tough terms.
Energy Transfer Equity has had its eye on Williams Companies for a while now, but things didn’t get serious until June when Energy Transfer Equity offered to pay $48 billion worth of ETE stock … an amount that has since been whittled down to only $34 billion due to the declining value of ETE.
Now, with considerably less value to the offered deal than four months ago, ETE is now offering that same value, but with 15% of the offer being cash rather than ETE shares.
It’s still a relatively uninspired deal for WMB owners, but with Williams Companies’ numbers still deteriorating, it may be an even worse (and dilutive) deal for suitor Energy Transfer Equity.
Twitter Inc (TWTR)
Last but not least, just when you think the news can’t get any worse for Twitter, it gets worse.
Thursday’s bad news for TWTR owners came in the form of a revised — lower — advertising sales outlook. Industry research and news group eMarketer still acknowledges Twitter is growing, but has reeled in its full-year ad-sales growth outlook for the microblogging site from 70% to only 62%.
Simultaneously, Citigroup lowered its price target on TWTR from $37 to $30. The rating remained at neutral, though analyst Mark May opined:
“Our analysis suggests that consensus estimates for 2016, particularly with respect to US ad revenue, may be too high, as they implicitly assume large increases in monetization that may not materialize.”
TWTR ended the day down only about 1%, but is down 50% since April’s peak.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
