Image source: Ballard Power Systems.
Investors let the stock market take a break from its run of record highs, with the S&P 500 and Nasdaq giving up modest amounts of ground on Tuesday. The Dow managed to eke out a small gain to set another all-time high, but more broadly, investors seemed concerned about a gloomier turn to the just-started earnings season and the potential that further disappointment could break the stock market's bull rally. Concerns on the political and economic fronts are gaining steam as the Presidential election approaches and macroeconomic conditions worldwide remain shaky, and some companies suffered much greater losses than the overall market. Among them were Ballard Power Systems (BLDP -0.73%), Tile Shop Holdings (TTSH -2.56%), and Guess? (GES -0.16%).
Ballard plunges after investors reconsider new fuel-cell stack agreement
Ballard Power Systems plunged more than 22% on Tuesday, but that represented only a portion of its gains from Monday as investors tried to puzzle through the potential impact of a new deal to build a fuel stack production operation in China. The deal with Guangdong Nation Synergy Hydrogen Power Technology will provide for fuel cell stacks that will go into locally assembled engines and then placed into zero-emission buses and commercial vehicles within the country. Under the deal, Ballard will receive $18.4 million in revenue for technology transfer services and related items, and it will take a 10% stake in its joint venture with Synergy covering the stack manufacturing operations. Ballard will also get an exclusive supply agreement for membrane electrode assembly technology for the stacks, and minimum annual volume of $150 million during the initial five-year term will give Ballard assurance that the deal will pay off. Nevertheless, investors seemed to pull back from their initial enthusiasm today as they realized that the huge boost in market cap likely wasn't justified by the size of the deal.
Tile Shop doesn't give investors everything they want in its earnings report
Tile Shop Holdings fell 10% after reporting its second-quarter earnings and giving its outlook for the remainder of the year. The company posted impressive revenue growth of 11%, with comparable store sales gaining 8.2% from year-ago levels. Net income jumped by more than half, and CEO Chris Homeister was pleased with the results, saying that "we continue to deliver against our key initiatives, and the outcome was another quarter with outstanding sales performance and significant earnings growth." Yet investors weren't happy with Tile Shop's guidance, despite its including projections for net revenue of $322 million to $329 million, comps growth in the mid- to high-single digit range, and adjusted earnings of $0.41 to $0.45 per share. Sometimes, high-growth companies see their shares fall even after good reports, and that seems to be the case with Tile Shop today.
Guess? gets a downgrade
Finally, Guess? fell 7%. The jeans-maker received a downgrade from analysts at Piper Jaffray, who reduced their rating on the stock from neutral to underweight. Guess? has been trying to turn around its business, which has suffered setbacks recently, but analysts believe that there are reasons to be concerned about Guess? inventory levels and competitive pressures in the industry. In past quarters, Guess? has noted that aggressive discounting industrywide has contributed to the company's having to slow down its plans for a return to its past growth trajectory. Until the retail environment improves, Guess? could have trouble making much headway for shareholders.
