Although the market got off to a bearish start on Wednesday following weaker-than-expected sales of new homes in January, the bulls managed to fight their way back into the black before the closing bell rang. In fact, the shape and depth of the reversal itself was quite compelling. The S&P 500 finished the day at 1,929.8, up 0.44%.
Not every name managed to fight its way back into the black, though. Rio Tinto plc (ADR) (NYSE:RIO), Avis Budget Group Inc. (NASDAQ:CAR) and Ford Motor Company (NYSE:F) all skipped out on the rebound effort. Here’s what investors need to know.
Rio Tinto plc (ADR) (RIO)
Despite the fact that most commodity prices managed to fight their way back into the black today (or at least got back to near-breakeven levels) after a weak open, Rio Tinto had no such luck. RIO shares finished the day down more than 3% — in step with plenty of other iron ore miners — following a double dose of downgrades.
Citigroup took the first swipe, lowering its rating on the metals and mining sector from “bullish” to “neutral” after these stocks managed to make respectable gains this year on the heels of a weaker U.S. dollar in the corresponding level of optimism for names like Rio Tinto.
Bond-rating agency Moody’s took a more direct shot specifically at RIO, lowering its unsecured debt rating to Baa1, and adding that its outlook for the mining company was negative based on the current market environment.
Ford Motor Company (F)
Rio Tinto wasn’t the only name to be in the wrong group at the wrong time — and then be singled out as well — by bearish analysts today. Ford Motor Company was also doomed from the beginning of today’s trading for sector and company-specific reasons.
Credit Suisse dealt the first below, lowering its opinion on F from “neutral” to “underperform” based mostly on its current valuation; the current price-to-earnings ratio stands at 6.6.
Morgan Stanley fanned the bearish flames on Wednesday when the investment bank and brokerage firm noted that Ford as well as peer and rival General Motors Company (NYSE:GM) were both at greater risk of the recession than either company believes.
F ended the session down almost 3%.
Avis Budget Group Inc. (CAR)
Last but not least, Avis Budget Group fell a whopping 26.5% today following disappointing Q4 revenue and an even more disappointing outlook for the current year.
In its fourth quarter of fiscal 2015, car-rental company Avis Budget Group earned 18 cents per share on revenue of $1.9 billion. Analysts, however, were calling for a per-share profit of 18 cents per share of CAR and sales of $1.94 billion.
The real killer was its 2016 outlook. The company reported it’s only expecting a profit of between $2.70 and $3.30 per share this year, versus analyst expectations $3.43 per share of CAR.
JPMorgan analysts Kevin Milota and Nicholas Leibold noted:
“…Americas rental demand was +2.8% year over year, which lead Avis Budget Group to miss its FY15 rental demand guidance of +4%. 4Q trends were fine, but in the end, investors will quickly look forward to Avis Budget Group’s 2016 outlook, which we’d characterize as less than inspiring. First, Americas rental demand is expected to grow 2-4% with no signs of positive pricing (which is an intense focus for investors) on a constant $ basis, and likely negative on a reported basis (currency impact is $140m on revenue and $30m in EBITDA for FY16). EPS and EBTIDA underwhelmed versus our and the Street numbers heading into the print with EPS of $2.70-3.30 (versus our $3.48 and the Street’s $3.43) and EBITDA of $820-900m (versus our $925m and the Street’s $935m)…”
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
