The sellers backed off a bit on Wednesday following Tuesday’s shocking plunge. It was hardly a victory though. When all was said and done, the S&P 500 closed at 2,348.45, up a mere 0.19%.
Here’s a closer look at what upended each one.
Nike Inc (NKE)
Athletic apparel icon Nike reported mixed Q3 results after Tuesday’s closing bell rang, but it was mostly the company’s outlook that sent NKE shares 7% lower on Wednesday.
For the quarter ending in February, Nike earned 68 cents per share on $8.43 billion worth of revenue. Although sales were up 5% year-over-year, the top line missed estimates of $8.47, even as the bottom line beat expectations for a profit of only 53 cents per share of NKE.
The most alarming aspect of the third-quarter report, however, wasn’t last quarter’s lethargy, but the company’s forward-looking metric called ‘futures orders.’ Although Nike intends to discontinue publishing the number, it did serve it up this time around. The company says orders that have not yet been paid for or delivered fell 1%, versus expectations of a 3.4% increase.
The tepid results and outlook also confirm fears that rival Adidas AG (ADR) (OTCMKTS:ADDYY) is chipping away market share.
Sears Holdings Corp (SHLD)
Although struggling retailer Sears had posted its fourth-quarter numbers days ago, that news wasn’t the official U.S. Securities and Exchange Commission filing. When the company submitted that report to the regulator on Tuesday night, though, something new and alarming appeared. The 10-Q report specifically commented:
“Our historical operating results indicate substantial doubt exists related to the company’s ability to continue as a going concern.”
It’s boilerplate language investors have seen before. It’s not language, however, that SHLD owners have yet seen on any of its past quarterly or annual filings. It suggests the company’s management recognizes it may be beyond salvaging.
Sears has been struggling for years, logging its 21st consecutive quarter of declining revenue. Sears has booked more than $6 billion in losses over the course of the past four years.
SHLD ended the day down 12.3%.
Frontier Communications Corp (FTR)
Last but not least, you can thank Goldman Sachs for the 10.6% drubbing Frontier Communications took on Wednesday. Goldman said sell FTR, and the market did just that.
The warning came as part of a caution regarding most of the smaller telecom stocks. Analyst Brett Feldman downgraded Frontier Communications along with Windstream Holdings, Inc. (NASDAQ:WIN) and Centurylink Inc (NYSE:CTL), all to a “Sell” rating. He explicitly targeted Frontier, however, saying:
“We believe FTR may choose to suspend its dividend after 1Q17 in order to delever and build liquidity to address significant debt maturities in 2020-2022, even if it is not required to do so per its bonds’ covenants. With the stock’s dividend yield nearly 2x peers’, we believe the market is pricing in a 50% cut. We do not view this as sufficient to drive long-term delevering and have removed the dividend from our model after 1Q17.”
WIN shares fell 7.5%, while CTL was off 2.3%.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.