Despite a small wave of tepid economic news on Wednesday, the Santa Claus rally logged a third straight day of forward progress. The S&P 500 finished the day up 1.24% at 2064.28. Still, from a technical perspective, the rally was capped at some key technical resistance for the major indices.
Whatever the case for the broad market, owners of Bed Bath & Beyond Inc. (NASDAQ:BBBY), United States Steel Corporation (NYSE:X) and Micron Technology, Inc. (NASDAQ:MU) aren’t headed into the holiday with a great deal of Christmas cheer. Here’s why.
Micron Technology, Inc. (MU)
In the grand scheme of things, the market pretty much knew last quarter’s earnings would be dismal. There was just something about seeing the poor numbers in print, however, that spooked MU shareholders.
The irony is, Micron actually fared better than expected… in terms of earnings, anyway. The company earned 24 cents per share, versus analysts’ calls for a profit of only 23 cents per share of MU. The top line of $3.35 billion, however, fell short of the $3.46 billion the market was expecting.
The biggest driver of the 2% stumble from MU shares on Wednesday may have been the company’s guidance for the current quarter. Although the company remains optimistic about its NAND and DRAM product line and capabilities going forward, that’s not expected to help right now. Micron told investors to expect $2.9 billion-$3.2 billion in sales for the quarter underway, which translates into loss of 5 cents-12 cents per share of MU. The market had been expecting an average sales total of $3.47 billion and a profit of 22 cents per share.
Bed Bath & Beyond Inc. (BBBY)
MU wasn’t the only name to dip into the red ink on Wednesday thanks to earnings. Bed Bath & Beyond warned investors today that its official Q3 results would also be disappointing when they’re posted early next year.
The quarter in question ended on November 28th, or the Saturday after Thanksgiving. Though the accounting work isn’t quite done yet, the retailer expects to post a profit of $1.07-$1.10 per share of BBBY, versus analyst estimates of $1.20 per share. Sales of $3.0 billion will also miss estimates of $3.02 billion.
The announcement was enough to prompt downgrades and lowered price targets from some analysts, including Wedbush analyst Seth Basham, who said of his new target of $48 (down from $62):
“BBBY preannounced sharply lower than expected 3Q15 results yesterday AMC, the company’s 8th miss on comps and/or EPS in the past 10 quarters. In line with our sector view, BBBY is not immune to rapid secular change occurring in home retail, with consumers shifting their shopping from stores to digital channels and leading BBBY’s market share losses to accelerate as we show inside. Indeed, the home category is the fastest growing online retail sales category this holiday season, according to comScore. With a high fixed cost base in its stores, and heavy omnichannel investments, this shift poses significant challenges for BBBY and most other brick and mortar home furnishings retailers.”
BBBY ended the day down nearly 5%.
United States Steel Corporation (X)
Last but not least, United States Steel Corporation — better known as just U.S. Steel — saw its stock lose more than 4% of its value today not on earnings news, but in the wake of reports that new tariffs on U.S. imports of Chinese steel still won’t be enough to curb the country’s steelmaker’s struggle.
The tariff rate on Chinese steel imported into the U.S. now stands at a whopping 256%, thanks to anti-dumping complaints lodged by United States Steel as well as peer and rival AK Steel Holding Corporation (NYSE:AKS) in the middle of the year. Even with the steep prices the tariffs will create, however, it still may not be enough to turn the tide back in favor of domestic producers.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
