A Weak End to a Strong Season: Earnings This Week

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A good earnings season ended on a weak note, thanks to dinosaur consumer stocks.

Traditional retailers and food stocks are down sharply as changes in the ecosystem continue to weigh on sentiment. Some beat estimates, others missed. Either way, investors looked for reasons to hit the sell button.

Consider these stocks that “should have” gone up:

  • PVH (PVH): The apparel company beat on the top and bottom lines. It raised guidance. The result? Shares tanked 8 percent.
  • American Eagle (AEO): The clothing merchant also came in ahead of estimates. But guidance was a bit light. That was enough to erase 13 percent of its value for the week.
  • Best Buy (BBY): Ditto for the electronics chain, which is looking at a 6 percent decline in the last five sessions.
  • Tiffany (TIF) beat across the board. Just imagine if it had missed… then it might be down more than 5 percent.

Other companies also dropped after failing to hit their numbers:

  • Abercrombie & Fitch (ANF) cratered 20 percent after sales came up short.
  • Dollar Tree (DLTR): The bargain-retailer got discounted by 13 percent after profit, revenue and guidance missed.
  • Foot Locker (FL): Earnings beat, revenue beat. But it got stomped down 8 percent after same-store sales disappointed.
  • Gap (GPS): Identical story as FL, except it’s down 7 percent in the last week.

Overall, the narrative seems consistent with the earlier pattern of investors embracing turnaround stories and rejecting old-fashioned business models. They loved digital transformation at companies like Wal-Mart Stores (WMT), Target (TGT) and Nordstrom (JWN). But dinosaurs like Macy’s (M) remain on their endangered species list with predators like Amazon.com (AMZN) on the prowl.

Did you see our special report on how the U.S. economy may be shifting from consumer spending to business investment — especially in technology? Click here for access.

Some technology names also reported. The biggest one, Salesforce.com (CRM), shot higher before its results and then slipped on weak guidance. Other software names like Autodesk (ADSK) and Splunk (SPLK) ripped on strong results.

Ciena (CIEN) is also up 13 percent after beating estimates. It’s the latest in a series of strong reports in the fiber-optic space.

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David Russell is VP of Content Strategy at TradeStation. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.