Despite a wobbly start, the bulls finally got the ball rolling on Monday, perhaps fueled by a strong increase in the pace of existing home sales and continued improvements in home prices.
Last month, existing home sales hit a multi-month high annualized sales pace of 5.19 million, and the FHFA reported a 0.7% increase in average home values … values that once again reached multi-year record levels. All told, the S&P 500 ended Wednesday at 2,107.96, up 0.51%.
It wasn’t a banner day for all stocks, however. The earnings bug bit Cree, Inc. (NASDAQ:CREE), Discover Financial Services (NYSE:DFS) and Chipotle Mexican Grill, Inc. (NYSE:CMG), sending them all more than a little lower.
Chipotle Mexican Grill (CMG)
When investors have grown accustomed to always seeing great results from a company they own shares in, a slip to merely “pretty good” still isn’t good enough. Just ask executives at Chipotle Mexican Grill, who saw CMG lose more than 7% of its value on Wednesday following last quarter’s earnings announcement.
The company didn’t post a loss, or even miss estimates. Chipotle earned $3.88 per share, versus estimates for a profit of $3.66 per share of CMG stock. That bottom line trounced the year-ago profit of $2.64 per share. Revenue was up 20% on a year-over-year basis.
The impasse was same-store sales growth. It rolled in at only 10.4%, while investors were expecting same-store sales growth of a little more than 16%, more in line with the restaurant chain’s usual growth pace.
Cree (CREE)
LED lighting and display company Cree came up short of earnings estimates for its fiscal third quarter. Specifically, the company came up short of a projected profit of 24 cents per share by only posting a profit of 22 cents per share.
The company’s guidance for the current quarter wasn’t any more encouraging. Cree informed investors it was only looking for a profit of 24 to 28 cents per share on revenue of somewhere between $420 and $440 million. Analysts had been calling for an average of 29 cents per share of CREE and $434.4 million, respectively.
CREE finished the day down almost 9%.
Discover Financial Services (DFS)
Credit card company Discover Financial Services may have beaten its quarterly estimates for Q1, but between the year-over-year decline in the per-share profit for DFS and an alarming comment made by CEO David Nelms, investors had more reason to worry than to celebrate.
All told, Discover Financial Services earned $1.28 per share last quarter. The figure topped outlooks for a bottom line of $1.26 per share of DFS, though it came up shy of the profit of $1.31 per share reported in the same quarter a year earlier.
It was CEO David Nelms who may have unwittingly spurred most of the 2.3% loss DFS suffered on Wednesday, however, when he defended American Express Company (NYSE:AXP) after announcing it would be ending its relationship with Costco Wholesale Corporation (NASDAQ:COST) as one of the credit card choices Costco customers have as its stores. Nelms’ commented:
“Being able to control when to do a deal and when to walk away is one of the advantages [when serving as both the payments network and lender]….I would say AmEx decided to walk away…. [being a lender and a processor] has become very competitive…. That makes me glad that we’re not in the co-brand business.”
More than a few DFS investors were left wondering if Nelms also has some relationships he’d similarly be willing to walk away from.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
