While the prior two trading weeks were the worst two-week stretch in months, the bulls finally managed to push back with some conviction. Today’s 0.90% gain for the Dow Jones Industrial Average was its best single day in almost four months. It closed at 21,899.89 … back within sight and reach of the record highs it hit three weeks ago.
Here’s what upended each one.
Coty Inc (COTY)
Cosmetics and fragrance company Coty may have driven more sales than expected last quarter, boosted by its recent acquisition of brands formerly owned by Procter & Gamble Co (NYSE:PG). Its fiscal fourth-quarter profits still came up short of estimates though, sending COTY to a whopping loss of 9.4%.
For the period ending June, Coty turned $2.24 billion worth of revenue into a loss of 41 cents per share; on an operating basis the company broke even. While analysts were only calling for a top line of $2.17 billion, those same analysts were expecting earnings of 9 cents per share of COTY.
Its Covergirl line was notable weak point last quarter, and expenses were greater than had been anticipated.
Momo Inc (ADR) (MOMO)
As much pain as Coty dished out to shareholders today, China’s Momo managed to dish out more.
MOMO isn’t a recognized name in the western world, but in eastern Asia it’s quite the rage. It operates a social networking site that’s built from the ground up to work on mobile devices. It boasts just a little less more than 90 million monthly users, which isn’t a lot compared to the likes of Facebook Inc (NASDAQ:FB). But, it’s growing fast.
It’s just not growing fast enough to suit MOMO shareholders … at least not as of last quarter. Although Q2’s top line of $312.2 million more than doubled that of the same quarter a year earlier and topped estimates, the market’s valuation may have been tacitly pricing in even better results. MOMO shares are priced at 34.3 times their trailing earnings and 9.5 times their trailing sales, which which is frothy by any stretch of the imagination.
MOMO lost 20.1% of its value on Tuesday as the market right-priced the stock in the shadow of its earnings report.
Baozun Inc (ADR) (BZUN)
Finally, while things were bad for Coty on Tuesday and even worse for Momo, they were downright awful for Chinese retailing consultant/service provider Baozun. BZUN fell a stunning 24.2% today after reporting second-quarter numbers that didn’t meet estimates. Earnings of 8 cents per share (well, ADR) fell short of the 10 cents per share the pros were modeling.
No, the punishment didn’t fit the crime. Although Baozun missed its profit estimates, it wasn’t a gaping shortfall and it’s still profitable. That’s more than too many other companies can say. Driving the bulk of the setback is largely the stock’s doubling since the end of April.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. Follow him on Twitter, at @jbrumley.