U.S. equities opened the week with mixed results amid a wild day for oil. Refineries in Texas were hit hard by Hurricane Harvey, resulting in a temporary halt of operations … and yet oil prices actually dropped 2.7%. As for the major indices, the S&P 500 Index ticked 0.1% higher, the Dow Jones Industrial Average fell marginally and the Nasdaq Composite came out ahead by 0.3%.
Earnings are propelling some serious moves this morning, including in Finish Line Inc (NASDAQ:FINL) and Catalent Inc (NYSE:CTLT). And in fact, Finish Line’s preliminary Q2 warning may have been disastrous enough to spark a little fallout in Nike Inc (NYSE:NKE).
Here’s what you need to know as we head into Tuesday’s trading day.
Finish Line Inc (FINL)
Finish Line gave Wall Street a disastrous warning Monday night ahead of its second-quarter report (due out Sept. 22) that forced a halt in trading.
When FINL stock did begin trading again, it collapsed.
The athletic apparel retailer says revenues for Q2 declined 3.3% to $469.4 million — short of expectations for $477 million — on the back of a 4.6% plunge in comparable-store sales. Finish Line now believes earnings will come in a range of 8 cents to 12 cents per share, which is far shy of the consensus estimate of 37 cents.
The marketplace for athletic footwear became much more promotional as our second quarter progressed resulting in challenging sales and gross margin trends,” said CEO Sam Sato.
The company also updated its outlook for the rest of the year, and there’s not much good news there.
FINL is projecting a third-quarter loss of 32 to 40 cents, wider than last year’s 24-cent loss. That should come on a comps decline of 3% to 5%. The company expects a similar comparable-store sales performance in its Q4, with an earnings range of 50 cents to 58 cents helped by an extra week in the quarter, which FINL believes will generate 6 cents of its EPS. The company earned 50 cents per share in the year-ago quarter.
All told, its full-year guidance is a huge downgrade from previous guidance of $1.12 to $1.23 per share, to just 50 to 60 cents per share. Finish Line earned $1.06 on an adjusted basis in 2016.
FINL stock is plunging 30% ahead of Tuesday’s opening bell.
Nike Inc (NKE)
NKE shares are on the decline this morning, as one analyst felt compelled to lower the sports apparel giant’s price target amid another weak quarter for a sports apparel retailer.
In the past month or so, Dicks Sporting Goods Inc (NYSE:DKS) and Foot Locker, Inc. (NYSE:FL) have delivered big earnings misses and Hibbett Sports, Inc. (NASDAQ:HIBB) offered up its own warning back in July. And more reports keep pointing to strength in Nike competitor Adidas AG (OTCMKTS:ADDYY). Jefferies confirmed the Adidas threat last week, saying its data shows weakness in Nike performance.
Making matters worse, Jefferies said in a note last week that Adidas AG (OTCMKTS:ADDYY) is eating up market and brand share.
This morning, Morgan Stanley’s Jay Sole piled on.
While he maintained his “Overweight” rating on Nike, he dropped his PT on the stock from $68 to $64, still implying nearly 20% upside from current prices. And he too expressed concerns about Adidas’ encroachment.
Sole also lowered his 2018 EPS target from $2.58 to $2.44, and believes sales will decline by 2%, rather than his original forecast of 3% growth.
NKE shares are off 2% this morning.
Catalent Inc (CTLT)
CTLT shares are popping this morning following its quarterly results.
The pharmaceutical technology and development company revealed fourth-quarter earnings of 65 cents per share, which topped Wall Street’s projections by 8 cents. That figure was up 25% year-over-year. Revenues of $616.9 million were 15.9% better than the year-ago period, and were plenty higher than estimates for $547.48 million.
Its Softgel Technologies segment revenue came to $257.1 million, up 14% YOY. Drug Delivery Solutions brought in $270.2 million to the top line, up 13%. And its Clinical Supply Services segment improved by 22%, raking in $99.3 million.
“Fiscal year 2017 was strong across many fronts with financial performance above our long-term outlook, significant levels of free cash flow generation, and the completion of two strategic acquisitions, Pharmatek and Accucaps, both of which are already creating value for the company and our shareholders,” said Catalent Chairman and CEO John Chiminski.
CTLT stock is soaring more than 11% higher in Tuesday’s early trade.