The midday lull following the strong opening wasn’t enough to hold the market down all day. By the time the closing bell rang, the S&P 500 fought its way back to a 0.78% gain, ending the session at 1938.68.
Not every stock hitched a ride on the bullish train, however. Alcoa Inc (NYSE:AA), Akorn, Inc. (NASDAQ:AKRX) and Williams Companies Inc (NYSE:WMB) each suffered significant losses, albeit it for understandable reasons.
Alcoa Inc. (AA)
Unofficially kicking off Q4 earnings season, Alcoa reported last quarter’s numbers after Monday’s close. They were better than expected. In fact, the aluminum company managed to top expectations. They just weren’t good enough to satisfy owners of AA.
All told, Alcoa earned an operating profit of 4 cents per share of sales of $5.2 billion. The bottom line topped the expected earnings of only two cents per share of AA, though the revenue tally fell a bit short of the estimated $5.2 billion. The market saw the glass as half-empty rather than half full.
While the company anticipates record-breaking demand for aluminum this year, investors simply couldn’t look past the brewing headwind its upstream (value add) business will face. Nomura analyst Alexander Burnes opined:
“We remain concerned by sustained oversupply of upstream alumina/aluminum markets combined with signs of downstream margin pressure ahead of Alcoa’s proposed split. Firth Rixson has fallen short of the company’s operational targets to date, while pricing pressure and OEM destocking are expected to weigh on the base aerospace business within Engineered Products and Solutions. For Global Rolled Products, 2016 appears set for another year of only moderate EBITDA growth, as accelerating auto sales are likely to be offset by added costs related to the idling of Warrick and continued contraction of packaging markets.”
AA shares ended the day down 9%.
Williams Companies Inc. (WMB)
Another bad day for oil prices meant another horrible day for pipeline companies. Leading that charge was Williams Companies; WMB lost 10% of its value on Tuesday as crude fell 3% to a close near $30.50 per barrel.
Of course, WMB had plenty of help marching lower today. The stock is still feeling the effect of a credit downgrade. Fitch downgraded Williams Companies’ creditworthiness to BB+, while Moody’s now rates Williams Companies Ba1. Both of the new ratings score as “junk” status.
A weaker credit rating makes it even more expensive to secure loans, and with chatter of reduction in distributions from WMB already in circulation, any new drag on an already-shrinking cash flow makes WMB even more difficult to justify owning.
Akorn, Inc. (AKRX)
Last but not least, for a second day in a row, Akorn lost a great deal of ground, though for the same reason on both days — AKRX is on the verge of being delisted as a Nasdaq stock.
The setback may not have been so harsh had one of the reasons for the looming delisting not been the company’s failure to simply hold an investor meeting in calendar 2015. It’s a sign of basic ineptness managing a publicly traded company.
Tuesday’s 11% pullback translates into a 20% dip from AKRX for the week so far.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
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