Reversing course from Tuesday’s sizable but mostly unsupported advance, the S&P 500 lost 0.96% of its value on Wednesday … right on the heels of several concerning earnings reports. Stocks aren’t beyond salvaging after today’s setback, but investor confidence took a big blow.
Leading the bearish charge were Macy’s, Inc. (NYSE:M), Office Depot Inc (NASDAQ:ODP) and Walt Disney Co (NYSE:DIS). Here’s a closer look at how each one was up-ended.
Macy’s, Inc. (M)
Macy’s first-quarter numbers and revised full-year outlook couldn’t be considered anything other than disastrous. These results sent M shares lower to the tune of 15% … the leader of the day’s biggest large-cap losers.
Per-share earnings were fine, rolling in at 40 cents per share (operating) versus the 36 cents per share of M analysts were modeling. Sales, however, missed estimates of $5.93 billion by coming in at $5.8 billion. It was also the fifth consecutive quarter year-over-year sales fell.
However, the bulk of the toll M stock took on Wednesday stemmed from the company’s revised 2016 profit guidance. Previous earnings expectations of between $3.80 and $3.90 per share were whittled down to only between $3.15 and $3.40 per share.
CEO Terry Lundgren commented on the deteriorating results:
“We are seeing continued weakness in consumer spending levels for apparel and related categories … We are not counting on the consumer to spend more, so we are working harder to give customers more reasons to buy from us.”
Office Depot Inc (ODP)
After months of legal wrangling, the U.S. Court System agreed with the Federal Trade Commission that office supply retailer Office Depot and Staples, Inc. (NASDAQ:SPLS) shouldn’t be allowed to unite, even if Amazon.com, Inc. (NASDAQ:AMZN) is slowly but surely swiping their business as separate companies.
It didn’t take long for the downgrades to materialize. Jefferies, for instance, lowered its stance on Office Depot from a “Buy” to a “Hold,” and lowered its target price on the stock from $11.00 to $5.25. The analyst note stated:
“On a standalone basis, each company’s retail and contract segments are vulnerable to secular decline and increased competition.”
The news led ODP to a loss of 40% on Wednesday. Would-be partner Staples also lost ground today, giving up 18% of its value.
Walt Disney Co (DIS)
Last but not least, Macy’s wasn’t the only name to be hit hard by poor earnings numbers on Wednesday. Walt Disney hit a headwind as well in its second quarter — posted Tuesday afternoon — sending DIS more than 4% lower for the session.
Earnings of $1.36 per share were actually up 2% on a year-over-year basis, though they fell short of analyst estimates for a profit of $1.40 per share of DIS. Revenue grew 4%, reaching $12.97 billion, but sill missed expectations of $13.2 billion. Its ESPN brand continues to struggle with cord cutting, and now its Infinity video game franchise is being shut down.
Still, DIS has its fans. A note from Morgan Stanley analysts explained:
“Disney investors have been spoiled by persistent EPS outperformance driven by a truly remarkable multi-year run at the movies, bringing with it strong licensing revenues.”
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
