Although it was a back-and-forth effort all day long, when the closing bell rang, the bears were left standing, following through on Tuesday’s selling effort … though just barely. The S&P 500‘s close of 2,139.43 was 0.17% lower than the prior day’s last trade.
It could have been worse though — you could have owned GrubHub Inc (NYSE:GRUB), Edwards Lifesciences Corp (NYSE:EW) or Southwest Airlines Co (NYSE:LUV). Those three names were the worst of the worst amidst today’s action.
Earnings and outlooks get the bulk of the blame.
Southwest Airlines Co (LUV)
The rhetoric and headlines for Southwest Airlines are encouraging enough. The company topped its third-quarter earnings and revenue estimates, and the CEO said Southwest Airlines is “in a strong position.” The fact that LUV was down 8.5% on Wednesday, however, suggesting the market was looking beyond last quarter, and is more concerned about a lackluster outlook.
Last quarter, Southwest Airlines earned 93 cents per share on revenue of $5.14 billion. Both were better than the expected profit of 88 cents per share of LUV and a top line of $5.13 billion. Problem: Revenue still fell 3% on a year-over-year basis, and for the quarter currently underway, revenue per seat (per mile) is projected to drop for the entire industry again.
That being said, LUV was hit harder than other airlines on Wednesday, as it was the only carrier to report lower revenue for the prior quarter.
Edwards Lifesciences Corp (EW)
As tough as things were for LUV shareholders on Wednesday, they were even worse for Edwards Lifesciences investors. EW shares lost a whopping 17% of their value today on the heels of its third-quarter report.
In short, sales missed estimates of $749.6 million last quarter, rolling in at $739.4 million. Earnings of 68 cents per share of EW were still in line with estimates, and revenue was up 20% on a year-over-year basis. But, the market wasn’t forgiving, in that the strong sales pace was down slightly from Q2’s growth pace.
That being said, EW was up 48% year-to-date before last quarter’s numbers were unveiled. It was priced for perfection as well as more red-hot growth, and when the company’s Q4 guidance was merely in line with Wall Street’s outlook, investors balked.
GrubHub Inc (GRUB)
Finally, although food-delivery outfit GrubHub did well last quarter, it didn’t do well enough to satisfy shareholders.
For its third quarter of 2016, GrubHub reported earnings of 23 cents per share on revenue of $123.5 million. The market was only looking for a profit of 19 cents per share and a top line of $118.6 billion. That’s a 44% improvement in sales.
As was the case with Edwards Lifesciences though, expectations were and still are unrealistically high. And, as was the case with EW, GRUB was up 72% year-to-date immediately before reporting its Q3 numbers, leaving no room for more upside no matter how strong the Q3 results and Q4 guidance looked.
GRUB ended the day 12.7% lower
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
