What started out as a bearish day for the market didn’t quite end that way, as traders began to have second thoughts about just how rough Q4’s earnings season has been thus far. When all was said and done, the S&P 500 overcame a dip of as much as 1% to end the session down only 0.07%.
Not every name managed to rebound that well, however. HCP, Inc. (NYSE:HCP), TransDigm Group Incorporated (NYSE:TDG) and Viacom, Inc. (NASDAQ:VIAB) still managed to finish Tuesday alarmingly deep in the red. Here’s what traders need to know.
HCP, Inc. (HCP)
Healthcare REIT HCP, Inc. did fine last quarter. But, its guidance for the current year was disappointing, sending HCP shares lower to the tune of 17%. Peers and rivals Welltower Inc. (NYSE:HCN) and Ventas, Inc. (NYSE:VTR) fell 8% and 7%, respectively, in sympathy… with traders largely concluding if one is struggling, then all must be struggling.
For the fourth quarter of its previous fiscal year, HCP earned 80 cents per share on revenue of $668 million; analysts were only expecting a profit of 78 cents per share, and a top line of $638 million. The company generated revenue of only $603.5 million in the same quarter a year earlier.
For fiscal 2016, HCP reported it’s now looking for per-share earnings of somewhere between $2.45 and $2.55. The market had been modeling a bottom line of $2.62 per share of HCP this year.
Viacom, Inc. (VIAB)
Entertainment company Viacom managed to meet earnings estimates last quarter, but missed on the revenue front, sending VIAB shares down a whopping 21%. That wasn’t the most interesting thing about Viacom today, however. The show stopper was the strangely-strong response Viacom CEO Philippe Dauman had for critics questioning his leadership during the struggling company’s turnaround effort.
The numbers: In its first fiscal quarter of the year, Viacom earned $1.18 per share on revenue of $3.15 billion. The bottom line was in line with analyst estimates, but the pros were looking for $3.26 billion worth of sales.
Although not directed at anyone in particular (that we know of), Dauman made a point of saying during the conference call:
“our outlook and the facts have been distorted and obscured by the naysayers, self-interested critics and publicity seekers. We will not be distracted or deterred as we build for the bright future ahead.”
That said, analysts pushed back just as hard anyway. Bernstein analyst Todd Juenger noted:
“At this juncture, we think the stock is being driven much more by handicapping of the Dish renewal, and any continued drama surrounding changes in control. None of which is addressed in the press release, and probably won’t be addressed on the conference call either…
… Longer term, we continue to hold the view that the old business of serving kids/teens with linear TV networks is doomed, and the new business of serving kids/teens with on-demand, digitally delivered entertainment is unlikely to be won by Viacom, and even if they do, the economics are vastly inferior to the 40% margin/40% ROIC business they used to enjoy… We rate Viacom Underperform, TP $42.”
Industry peer Time Warner Inc. (NYSE:TWX) also fell on Tuesday, by 6%. Traders were mostly dumping TWX to be out of the stock by Wednesday’s close, when Time Warner is scheduled to report its fiscal Q4 earnings. The market may be assuming Viacom and Time Warner hit the same headwind last quarter.
TransDigm Group Incorporated (TDG)
Last, but not least, aerospace outfit TransDigm Group posted disappointing first-quarter results this morning, sending TDG shares sharply lower.
The market was looking for earnings of $2.32 per share and sales of $737.9 million. The company reported, however, a bottom line of $2.27 per share of TDG, and a top line of $701.7 million. Although the revenue tally was 20% better than the year-ago top line, the market saw the glass as half empty rather than half full. A recent string of acquisitions doesn’t appear to be paying off all that well.
TDG shares ended the day more than 12%.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.