With no real news to upend it, the market ended a very good week with a very good day. Thanks to Friday’s 0.38% advance, the S&P 500 finished the week up 3.3%, closing at 2,089.17.
Not every stock was a winner today, though. Chipotle Mexican Grill, Inc. (NYSE:CMG), Mentor Graphics Corp. (NASDAQ:MENT) and Sprint Corp (NYSE:S) all got hit hard, though for understandable reasons. Here’s the deal.
Chipotle Mexican Grill, Inc. (CMG)
The headlines linking Chipotle Mexican Grill to an E. coli outbreak are getting progressively worse, sending CMG shareholders into panic mode heading into the weekend.
The news was handed down by the Center for Disease Control Friday afternoon: A total of 45 known infections now spanning six states almost entirely have one thing in common… a meal recently eaten at Chipotle Mexican Grill. No specific food item has been pegged as the culprit, but the restaurant itself has been linked to the problem that’s been lingering since early in the month.
The news wasn’t exactly news. Chipotle Mexican Grill actually closed several restaurants earlier in the month, the first time the E. coli breakout surfaced and it was concluded to be the source. But, with those restaurants all reopening and shareholders likely assuming the gaffe was in the past, today’s news blindsided the market, sending CMG down more than 12%.
Sprint Corp (S)
In the grand scheme of things, it should have come as no real surprise. Sprint is bleeding cash, and its customer-attraction efforts cost more than they produce in revenue. It’s not a sustainable business model, particularly for a company getting low on cash the way S is.
Yet, S shareholders did seem to be caught off guard on Friday, with shares falling more than 5% on news that that the wireless service provider would be raising much-needed funds through a financing deal and lowering its full-year EBITDA outlook as a result.
Specifically, Sprint will be pocketing roughly $1.1 billion as part of a lease-back arrangement it has entered into with key backer Softbank Group. As a result of obligations created by the deal, the $200 million to $600 million operating profit it had been looking for this year will now likely be posted as an operating loss of between $50 million and $250 million.
Mentor Graphics Corp. (MENT)
Last but certainly not least, Mentor Graphics shares fell a stunning 36% on Friday after the company didn’t just share an outlook that was lackluster, but an outlook that was jaw-dropingly bad.
Last quarter, Mentor Graphics reported a profit of 28 cents per share on $291 million in sales. That was relatively close to the profit of 29 cents per share of MENT analysts were calling for, and their projected top line of $291.8 million.
The bulk of big pullback from MENT was driven by its outlook for the current quarter. The company now expects a top line of $336 million and earnings of 47 cents per share, versus analyst estimates of $439.3 million in sales and a profit of 97 cents per share of MENT.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
