Between a lackluster (preliminary) fourth-quarter GDP growth rate of 1.9%, stocks being overbought and the approaching weekend at a time when a new President is likely to say and do anything, the bulls weren’t interested in adding to their exposure on Friday. The S&P 500 ended the session at 2,294.69, down 0.09%.
Not every name managed to escape the bears’ clutches though. Starbucks Corporation (NASDAQ:SBUX), Colgate-Palmolive Company (NYSE:CL) and American Airlines Group Inc (NASDAQ:AAL) each dished out more than their fair share of pain, mostly in response to earnings reports and outlooks.
American Airlines Group Inc (AAL)
The good news is, American Airlines Group met last quarter’s earnings estimates. The bad news is, labor costs are on the rise. AAL shareholders chose to see the glass as half-empty rather than half-full, sending the stock lower to the tune of 5.3%.
For the quarter ending in December, the airline earned an operating profit of 92 cents per share on revenue of $9.79 billion. The top line was better than expected, and the bottom line matched analyst expectations. Operating income fell slightly despite a modest improvement in sales.
AAL shareholders were particularly concerned about the near-5% rise in operational expenses, driven up mostly by labor costs … a detail that had been largely overlooked until the conference call. That conference call also informed investors that American Airlines and Qantas intend to reinitiate a joint venture that had been previously rejected by the federal government. AAL shareholders weren’t impressed, however.
Colgate-Palmolive Company (CL)
Like American Airlines, Colgate-Palmolive posted an earnings report today, and similar to AAL shares, CL was sent noticeably lower … 5.2% when all was said and done. Unlike American Airlines though, Colgate-Palmolive wasn’t even able to top its sales estimates. Income of 75 cents per share was in line with estimates, but revenue of $3.72 billion was not only down 5%, but missed expectations of $3.87 billion. Weak demand from Europe was noted as the big headwind.
The pessimistic outlook for 2017 contributed to the selling that drove CL down on Friday. CEO Ian Cook said during the conference call, “I think it is safe to say that 2016 has been a year of growing uncertainty filled with unpredictable and disruptive events, especially in the fourth quarter.” Translation: He’s only expecting low single-digit sales growth this year.
Starbucks Corporation (SBUX)
Last but not least, Starbucks ended the week on a sour note, and once again an earnings report was to blame.
For its fiscal first quarter, the coffee house chain earned 52 cents per share, in line with estimates, but sales of $5.73 billion missed estimates $5.85 billion. Same-store sales growth of only 3% versus estimates of 3.8%.
The company attempted to turn lemons into lemonade, saying its app-based ordering led to congestion at the counter. That, however, led to some patrons walking out without making a purchase.
Not everyone is convinced even that’s the source of slowing growth though. Buckingham Research Group analysts opined, “Our view is that traffic across the industry was terrible, and Starbucks was simply not immune. In addition, the divergence in traffic and ticket leads us to speculate whether the price-value offer is getting lost in the quest for ever-increasing premiumization.”
SBUX closed 4.0% lower for the day.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.