The five-day losing streak for stocks finally came to an end on Wednesday, with the S&P 500 bouncing more than a full percentage point. Crude oil snapped out of its sharp pullback seen over the course of Monday and Tuesday too, with oil gaining 1.4% to close at a price near $48.60 per barrel.
Wednesday wasn’t a winner for name out there, though. Radian Group Inc. (RDN), RPM International Inc. (RPM) and Helmerich & Payne, Inc. (HP) all took a pretty good beating thanks to some alarming news for each organization.
Helmerich & Payne (HP)
Despite crude oil’s bounce today, the market still doesn’t trust drillers like Helmerich & Payne. Of course, Helmerich & Payne didn’t help itself any by plainly stating in an SEC presentation, “Drilling activity and spot dayrate pricing are now expected to significantly decline in the U.S.”
As evidence of — and perspective on — this struggle, SunTrust’s Chase Mulvehill and Josh Large explained in their notes to investors:
“While Helmerich & Payne noted a current rig count of 287 (not terrible vs. 294-297 guidance for CQ 4Q14), they expect to see a whopping 40-50 FlexRigs idled over the next 30 days. This implies Helmerich & Payne’s rig count will be down ~20% (~240 rigs) by late Jan/early Feb from the 298 active rigs on 11/13/14. Don’t expect the rig count to stop falling then. By the time all is said and done, we think Helmerich & Payne’s rig count will be down in the mid-30% range from CQ 4Q14 average.”
HP stock closed more than 6% lower today.
RPM International (RPM)
RPM International didn’t do anywhere near as well as expected in its fiscal Q2, which was reported this morning. The chemical company only earned 53 cents per share of RPM stock, vs. a consensus estimate of 55 cents. And revenue of $1.07 billion was shy of the projected $1.12 billion. RPM International lowered its full-year outlook as a result.
At the heart of the shortfall is its reliance on the European market. Although Europe has not yet fallen back into recession, economic activity remains suppressed. Meanwhile, the ongoing increase in the value of the U.S. dollar is not only hurting results when translated from foreign currencies, it’s also making the company’s goods expensive for overseas customers.
RPM stock fell nearly 8% on Wednesday.
Radian Group (RDN)
Mortgage insurer Radian Group got a double dose of bad news on Wednesday.
The first part of the one-two punch combination that tripped up RDN stock was the announcement of last month’s delinquencies. Although the number of delinquent loans actually fell from 45,908 in November to 45,319 in December, the number of new delinquencies actually grew from 3,968 to 4,004 last month. An increase in the number of new delinquent loans could be a sign that we’re entering a phase of increasing non-payments that Radian Group will ultimately end up paying.
The other — and likely more potent — half of the one-two combination that knocked down RDN stock today was an announcement from the White House that President Obama was looking to cut FHA mortgage premiums in an effort to rekindle home purchases. The annual fee for such insurance is now set to fall 50 basis points to only 0.85% of the loan balance.
Mortgage insurers like Radian Group compete with the FHA and its mortgage insurance arm, so lower-cost FHA loans could mean lost business from the private sector companies offering such a service.
All told, RDN stock fell more than 4% today.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
