While the bulls managed to push stocks up and off of their lows on Friday, they weren’t able to get the market all the way back into the black. The threat of rising interest rates in the shadow of higher-than-expected inflation pressure was simply more than investors were ready to digest today. The S&P 500 finished the day down 0.01%, closing at 1917.78.
That would have been a palatable result for owners of Sprint Corp (NYSE:S), Nordstrom, Inc. (NYSE:JWN) and Valeant Pharmaceuticals Intl Inc (NYSE:VRX) today, however. Each of these names lost much more than that. Here’s what happened.
Valeant Pharmaceuticals Intl Inc (VRX)
Just when it looked like Valeant Pharmaceuticals was finally going to be able to shake off its implosion last year, Wells Fargo came along and pulled the rug out from underneath VRX shares.
Long story made short, Wells Fargo has initiated coverage on VRX, but it doesn’t think very highly of the specialty pharmaceutical stock. Analyst David Maris wrote of the company:
“The Valeant board and management have made decisions that may have put Valeant at significant business and reputational risk… Our concerns stem from a number of factors, including opaqueness related to accounting issues, what we see as balance sheet risks… [the company is using] considerable subjectivity in setting up deferred tax asset accounts.”
The market took that ball and ran with it, of course, sending VRX down by nearly 10% on Friday. Even then, however, the stock’s current price of $85 is still nowhere near the $65-$68 target price range Wells Fargo opened up its coverage with.
Sprint Corp (S)
At another time and in another situation, the price cut from mobile telecom service provider Sprint would have been cheered. With a lengthening history of fiscal and competitive trouble, though, today’s announcement of such was anything but music to the ears of Sprint shareholders.
The so-called “Sprint Better Choice Plans” effectively gives most plans a 50% increase in their data-usage allotment.
The offer makes Sprint more competitive, but at the expense of margins… and the company is already swimming in un-profitability. The new pricing plan is being seen as a sign of desperation, rather than reason to hope for a turnaround.
Sprint shares ended the day down more than 4%.
Nordstrom, Inc. (JWN)
Last, but not least, Nordstrom shares lost almost 7% of their value on Friday following a disappointing fourth-quarter report. Last quarter, the upper-scale retailer earned $1.00 per share on sales of $4.14 billion. Both figures fell short of analysts’ estimates of a bottom line of $1.20 per share of JWN and a top line of $4.22 billion.
The outlook for the current year wasn’t particularly impressive, either, but the real damage to JWN may have been inflicted by Standard & Poor’s, which lowered its credit rating on the company to BBB+. It’s a sign of the performance weakness investors may have been expecting.
The quarterly numbers from Nordstrom also inspired downgrades of JWN shares. Credit Suisse analyst Michael Exstein noted of the numbers:
“It is difficult to put JWN’s performance in context until the rest of the industry reports earnings, but these challenged results clearly highlight the difficult transition the mall anchors are facing, both cyclically and secularly. The growth of e-commerce has resulted in structural changes in these retailers’ cost structure, and we think that retailers may need to revaluate the feasibility of their operating margin goals given the structural shift to this lower margin channel.”
Exstein also lowered his target price on JWN from $60 to $55 per share.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
