Still mostly on the fence through Wednesday’s close, a few too many more alarming earnings reports and a few too many more reasons for Janet Yellen to raise interest rates in June was more than the bulls could fend off. The loss of 0.37% for the S&P 500 today left it at 2040.04 after hitting a new multi-week intraday low.
Among the worst of the worst performers on Thursday were Petroleo Brasileiro SA Petrobras (ADR) (NYSE:PBR), L Brands Inc (NYSE:LB) and Cheetah Mobile Inc (ADR) (NYSE:CMCM).
Here’s a closer look at what up-ended each.
Petroleo Brasileiro SA Petrobras (ADR) (PBR)
As if Brazilian oil company Petroleo Brasileiro SA Petrobras — commonly just called Petrobras — didn’t have enough headaches to deal with between a lingering oil glut and the distraction of Brazilian President Dilma Rousseff’s impeachment proceedings, the company was given another left hook today.
This time, the hit came from Raymond James, which downgraded PBR from “market perform” to an “underperform”. Raymond James analyst Pavel Molchanov explained of the downgrade:
“…Put simply, this stock has traded not on its own fundamentals but rather as a proxy for Brazilian politics, i.e., the impeachment of President Dilma Rousseff. Following last week’s vote in the Senate, we think this trade is over, and the multiple expansion has run its course. … While this is not a valuation-based downgrade, a notional bull case would be the Ebitda multiple rising to 4.5x, implying a $9.50 stock. On the other hand, further pressure to 3.5x Ebitda would imply a $4.00 stock.”
PBR closed at $6.42 today, down 5%.
L Brands Inc (LB)
Not unlike most (though not all) retailers so far this earnings season, L Brands spooked shareholders with a lackluster outlook and a partial shortcoming of last quarter’s estimates.
In its first quarter of 2016, the parent company of Victoria’s Secret and Bath & Body Works earned 59 cents per share on revenue of $2.61 billion. The bottom line was better than the anticipated 55 cents per share of LB stock, but the top line missed estimates of $2.62 billion.
Conversely, the bottom line was worse than the year-ago profit of 61 cents per share of LB stock, but better than the revenue total of $2.51 billion generated in the first quarter of 2015.
The crux of today’s 5% tumble from LB shares, however, was driven by the company’s revised full-year guidance. Rather than the profit of between $3.90 and $4.10 per share it had been expecting in 2016, now the company only anticipates earning between $3.60 and $3.80 per share of LB. Analysts had been modeling an average profit of $4.04.
The new numbers drew downgrades from MKM and Robert W. Baird.
Cheetah Mobile Inc (ADR) (CMCM)
Last but certainly not least, Chinese internet services Cheetah Mobile saw its stock implode on Thursday after offering up some disappointing second-quarter guidance.
The first quarter’s numbers were actually pretty decent. The company earned (operating) 0.71 yuan per share, topping estimates of 0.67 yuan per share of CMCM, and revenue grew 58% on a year over year basis to 1.12 billion yuan. That too beat expectations of only 1.09 billion yuan.
Looking ahead though, Cheetah Mobile announced it only expects Q2 revenue of somewhere between 975 million yuan and 1 billion yuan, versus the market’s expectation, on average, of 1.33 billion yuan.
CMCM ended the day down 18%.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
