Investors Pardon Recent Earnings Slips
July 15 2019 - 3:58PM
Dow Jones News
By Corrie Driebusch
Second-quarter earnings are shaping up to be a challenge, but
the stock trajectories of some companies that have already reported
show that investors are forgiving.
A handful of companies that reported disappointing earnings in
June are now in a surprising place -- their shares are near or
above their levels prior to reporting results. Shares of Conagra
Brands Inc., General Mills Inc. and Broadcom Inc. all tumbled as a
result of lowered guidance, squeezed profits or struggling sales.
They've since bounced back, suggesting to some analysts that the
market may be understanding of the global growth and trade issues
plaguing many U.S. companies.
"Some believe the 'earnings apocalypse' is upon us, with
negative [earnings per share] revisions on the rise. However, the
initial reactions...suggest this season is shaping up to be a time
of forgiveness," wrote Wells Fargo Securities senior analyst
Christopher Harvey in a note on Monday.
Shares of food makers Conagra and General Mills both fell in
late June.
Conagra's stock dropped 12% to $25.43 on June 27, one of the
worst performers in the S&P 500 that day, as its results were
hurt by expenses for steel for cans, as well as competitive
pressures.
General Mills' stock declined 4.5% to $51.31 on June 26 after
the Minneapolis-based company reported a decline in its snacks
business and flat sales of cereal and yogurt.
Broadcom in mid-June also struggled after it blamed trade
tensions between the U.S. and China for slowing sales in its
wireless business and weaker demand.
Its stock fell 5.6% to $265.93 on June 14, after reporting
disappointing earnings the prior afternoon.
Since then, Broadcom's stock is back above $288 a share, up an
additional 1% on Monday.
Meanwhile, Conagra's stock has clawed back much of its
earnings-day decline, rising more than 8% from its June 27 close.
General Mills is trading about a dollar below its closing price the
day before it reported earnings in late June.
According to Wells Fargo, this bounceback toward pre-earnings
release prices is good news, and suggests investors are prepared
"to look through bad news."
Write to Corrie Driebusch at corrie.driebusch@wsj.com
(END) Dow Jones Newswires
July 15, 2019 16:43 ET (20:43 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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