Though not inspired by any bad news, the bulls largely changed their mind on Tuesday, undoing the bulk of Friday’s big gain and pivoting lower from Monday’s indecisive action. By the time the closing bell rang, the S&P 500 was down 1.87% to end the session at 1903.03.
It could have been worse, though. You could have owned Itau Unibanco Holding SA (NYSE:ITUB), Twitter Inc (NYSE:TWTR) or Royal Caribbean Cruises Ltd (NYSE:RCL). Here’s why these three names tanked today.
Royal Caribbean Cruises Ltd (RCL)
Last quarter’s earnings were strong enough for Royal Caribbean Cruises, even though revenue fell a little short of expectations. The killer, though, was its guidance for the current year.
In the fourth quarter of 2015, Royal Caribbean earned 94 cents per share on revenue of $1.9 billion. Analysts were only collectively looking for a profit of 93 cents per share of RCL, but were also expecting an average of $1.96 billion in sales. For the current year, though, the cruise line reported it expects to see a profit of $5.90-$6.10 per share, versus analyst expectations of $6.27 per share. That guidance up-ended RCL, sending it down more than 15%.
And that weakness is going to kick in right away. The company says it’s only apt to report a profit of 30 cents per share for the current quarter, falling well short of the estimated 46 cents per share.
Twitter Inc (TWTR)
Just one day after the stock jumped on buyout rumors, Twitter shares have given up all of that hype-induced gain — and then some — after Stifel downgraded TWTR from a hold to a sell.
And Stifel’s analysts didn’t pull any punches, either, saying:
“Twitter is a product that has never fully developed into a sustainable public company due to either poor strategy, poor execution or that it was never destined to be one.”
Ouch.
Stifel went on to detail its concerns, specifically pointing out waning user growth and a lack of engagement for users who do come around.
The downgrade shocked a few TWTR shareholders, who had just heard the prior day that Silver Lake or another private equity firm could be interested in taking it private via a leveraged buyout. That’s unlikely to happen, though, at least according to Moody’s Rick Lane, who commented:
“We do not rate Twitter, but it seems to me that it would be considered a very ‘storied’ credit, with a lot of controversy and/or change regarding management structure, personnel changes, business outlook, et cetera. A rumored LBO and what that may portend about those issues and more adds to the ‘story.”
TWTR shares fell 10% on Tuesday.
Itau Unibanco Holding SA (ITUB)
Last, but certainly not least, as if Brazilian bank Itau Unibanco Holding wasn’t dealing with enough headaches already (in the shadow of a complete confidence crisis for Brazil’s government and economy), ITUB shareholders were told today that things may get worse before they get better.
Although Itau Unibanco managed to beat profit estimates last quarter, the bank expects rising loan defaults and slowing loan growth to lead to higher loan-loss provisions in 2016. Specifically, provisions could increase by as much as 38%, or $6.9 billion, this year.
The 10% pullback from ITUB up-ended a budding rebound effort. The stock is now down 65% from its late-2014 high, with most of that weakness inspired by a recession that’s quickly spiraling out of control.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
