The market was cautiously optimistic at first sight of President Donald Trump’s proposed tax overhaul, which cuts tax rates for individuals as well as business. The enthusiasm waned as the day wore on though. The S&P 500 ended Wednesday’s action at 2,387.45, down 0.5%.
A scant loss would have been preferable to the pain Cree, Inc. (NASDAQ:CREE), Dr Pepper Snapple Group Inc. (NYSE:DPS) and Seagate Technology PLC (NASDAQ:STX) dished out on Wednesday, however. Earnings reports upended all three stocks.
Here’s the deal.
Seagate Technology PLC (STX)
The good news is, disk drive maker Seagate Technology topped its fiscal Q3 earnings estimates, and revenue was up compared to the year-ago top line. The bad news is, the company’s Q4 outlook was miserable, and STX shareholders saw the glass as half-empty rather than half full.
For the quarter ending in March, Seagate Technology turned revenue of $2.67 billion into a profit of $1.10 per share. Analysts were only looking for income of $1.06 per share, but those same analysts were calling for a top line of $2.71 billion.
The bulk of the 16.8% setback STX stock suffered on Wednesday, however, stemmed from a lackluster outlook for the quarter currently underway. Seagate expects to rake in revenue of between $2.5 billion and $2.6 billion, versus analyst estimates of $2.68 billion. Its Q4 earnings outlook of $4.50 per share of STX matches estimates.
Dr Pepper Snapple Group Inc. (DPS)
STX wasn’t the only stock to pull back after the company topped earnings estimates, but fell short of revenue projections. Beverage maker Dr. Pepper Snapple reported similarly, and DPS shares served up the same result, falling 5.5%.
All told, Dr. Pepper Snapple earned an operating profit of $1.01 per share, versus expectations of only 96 cents per share of DPS. Sales of $1.51 billion were a hair better than the year-ago Q1 top line, but still missed the consensus estimate of $1.55 billion. The company went on to say it’s only expecting organic revenue growth of between 1% and 2%.
Cree, Inc. (CREE)
Finally, the third of Wednesday’s most noteworthy losers was down for the same reason as STX and DPS … a disappointing quarterly report. Unlike Dr Pepper Snapple and Seagate Technology though, LED lighting outfit Cree couldn’t even muster an earnings beat. It booked a loss of $1.02 per share, versus expectations for a profit of one cent per share.
In this case though, there’s a palatable explanation.
Cree has been trying to spin off its power and radio frequency unit, Wolfspeed, for some time now. It thought it was a done deal late last year, but the agreement to sell the business to Infineon fell through. That prompted an $86 million charge, leading to the sizable loss for the quarter. Had it not been for the write-down, Cree would have earned the anticipated one cent per share.
Still, sales of $342 million were down on a year-over-year basis, and still missed revenue estimates. And, the company still owns a division it doesn’t really want.
Cree shares ended the day lower by 11.1%.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.