The second-quarter earnings report and guidance process parade is continuing. This week, reports from engineering and construction companies such as McDermott International (MDR) and Fluor Corporation (FLR) reflected large losses, revenue misses, and uncertain futures.
Following its earnings report, shares of McDermott International (MDR) dropped 35.3% on July 30. For the remainder of the week, shares of McDermott International (MDR) dropped a further 17.5% for a total weekly loss of 46.6%. Similarly, shares of Fluor Corporation (FLR) dropped 26.7% on August 2 after its earnings report that marked its biggest one-day share price drop ever since its initial public offering (IPO) in December 2000. Fluor Corporation’s (FLR) stock is now trading at close to a 15-year low.
Food industry and restaurant industry stocks generally move in a slow and steady manner. Also, once the initial hype is over shortly after an Initial Public Offering (IPO) of a company’s stock, generally, the IPO shares start to decline and, mostly, an IPO’s shares trade for less than the IPO price one year later. However, many strange things can happen in the stock market and are worth paying attention to.
A recent example of an amazing IPO success story in the food industry in 2019 is Beyond Meat (BYND) which has returned 839.6% since its initial IPO price of $25 in early May. The table below notes performance of some of the other notable winners in the food industry and restaurant industry sector this year:
Second-quarter earnings season started in earnest this week and will continue for the next 3-4 weeks. This week, the S&P 500, Dow 30, and Nasdaq indices respectively dropped by 1.23%, 0.65%, and 1.18%. Thus, movement of the indices was fairly benign and insignificant. However, individual stocks can and do change significantly based on their earnings reports and future guidance vis-a-vis market expectations based on analysts’ reports.
This week, some of the stocks that moved quite a bit after their earnings reports were Netflix (NFLX), CSX Corp. (CSX), and Union Pacific Corp. (UNP). Netflix dropped by 10.3% by the market close on Thursday largely because of disappointing subscriber growth. Transportation sector stocks such as CSX Corp. and Union Pacific Corp. moved in opposite directions after their earnings reports largely because of their current quarter earnings numbers and their future guidance. CSX Corp. dropped by 10.3% by the market close on Wednesday, while Union Pacific Corp. moved up by 5.9% by the market close on Thursday.
After testimony of the U.S. Federal Reserve Chairman Jerome Powell to the U.S. Congress where he indicated the possibility that the central bank may cut interest rates during its meeting later this month, some of the major stock market indices reached their all-time highs. The S&P 500, Dow 30, and Nasdaq indices respectively closed at 3013.77, 27332.03, and 8244.14.
Another important event was the White House’s reversal on seeking to eliminate drug price rebates from drugmakers to pharmacy-benefit managers (PBMs). This resulted in major moves upward for the insurers and companies that operate large PBMs (e.g., ANTM, CVS, HUM, and UNH) and major moves downward for the pharmaceutical companies (e.g., LLY and MRK).