Despite the decent start to Wednesday’s session, Janet Yellen’s convincing threat of a December rate hike eventually rattled traders, sending the S&P 500 lower by 0.35% to a close of 2,102.31.
For some stocks, though, it was much worse. Time Warner Inc (NYSE:TWX), Groupon Inc (NASDAQ:GRPN) and Motorola Solutions Inc (NYSE:MSI) all posted major losses on Wednesday. Here’s why.
Motorola Solutions Inc (MSI)
Communication equipment maker Motorola Solutions reported third-quarter results that were better than expected on Wednesday morning. But, the earnings outlook for the current quarter was lackluster, sending MSI shares down more than 8.6% today.
In Q3, Motorola Solutions earned an operating profit of 82 cents per share on $1.42 billion in revenue. Neither were as impressive as the comparable numbers from the same quarter of 2014, but both were better than the per-share profit of 73 cents and top line of $1.408 billion analysts had been anticipating.
The tripwire for MSI shares on Wednesday, however, was the fourth-quarter profit outlook. The company says it’s looking for income of between $1.45 and $1.50 per share, while analysts had been modeling a profit of $1.57 per share of MSI. Revenue is projected to fall between 6% and 8%.
Time Warner (TWX)
Motorola Solutions wasn’t the only name to suffer from a troubling outlook despite solid Q3 results. Cable television provider Time Warner did the same.
For its third quarter, Time Warner posted a profit of $1.25 per share of TWX on revenue of $6.56 billion. The pros were only looking for a bottom line of $1.09 per share of TWX, and a top line of $6.5 billion. But, the earnings beat was superseded by a dire forecast for 2016’s bottom line. Now Time Warner is looking for income of $5.25 per share of TWX, which is dramatically lower than a prior projection of near $6.
BTIG Research analyst Rich Greenfield commented on the surprisingly lower outlook:
“There is no doubt that there is a major sea change in consumer behavior going on. The reality is [media companies] are all struggling with the fact that in order to adapt to consumer behavioral changes, they all need to make substantial investments. It will take several years of pain.”
TWX closed nearly 7% lower on Wednesday.
Groupon (GRPN)
The good news is, Groupon has a new CEO. The bad news is, Groupon needed a new CEO months ago to stop the bleeding before it spiraled out of control. Now that it has, the company may be years away from any semblance of success, if GRPN isn’t too far gone already.
Rich Williams, formerly the COO, was named as the new chief executive on Tuesday afternoon … news packaged with an ugly 2016 outlook for the daily deals coupon website. GRPN says it’s expecting revenue to roll in between $2.75 billion and $3.05 billion in the coming year, which is miles below the $3.5 billion analysts had been calling for.
While GRPN owners are happy to see change (any change) for struggling Groupon, the company made it clear those changes will incur a fiscal cost … money that Groupon arguably doesn’t have to spend.
GRPN ended the session 26% lower.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
