With the Fed hinting it will keep printing money to infinity and beyond and with Europe Central Bank head Mario Draghi yesterday calling for everyone to believe he'll save the euro, the markets decided to listen to the jawboning, and the Dow jumped 211 points in response. Some companies had their own problems to contend with though and managed to go in the other direction, many even plunging by double-digit percentages.
So let's see whether they had good reason to drop as sometimes panic-fueled declines can lead to excellent buying opportunities.
Yesterday's % Change
CAPS Rating (out of 5)
|NovaGold Resources (NYSE: NG )||(25.3%)||$4.02||***|
|Pacer International (Nasdaq: PACR )||(15.5%)||$4.02||****|
|Carbo Ceramics (NYSE: CRR )||(15.1%)||$68.48||****|
For oil and gas industry services provider Carbo Ceramics and freight transportation and logistics services specialist Pacer International, it wasn't so much what they did this last quarter that did them in (though Pacer's underperformance certainly didn't help), it's more of how they viewed the rest of the year that weighed their stocks down.
In Carbo's case, it actually turned in some record numbers, with sales volumes of ceramic proppants hitting new heights despite the influx of cheaper but inferior-quality Chinese ceramic proppants and the shift by E&P players shift away from the dry gas market to the liquids market. But those factors will pressure pricing, margins, and profits for the rest of the year, so that even after raising its dividend for the 12th straight year, Carbo's stock tumbled. It's lost 62% of its value after peaking at more than $160 a share late last year.
For Pacer, although its intermodal segment saw revenues grow by 9% and volumes surge 17%, operating income still fell, which exacerbated by a drop in logistics revenues. Without the ability to pass on price increases to railroad operators, gross margins deteriorated and a $0.12 per share profit last year turned into a penny per share loss this quarter. As a result, it had to lower its full-year guidance.
A dry bed
It wasn't so simple as a dour outlook that sank NovaGold Resources, but rather its whole reason for existence is called into question.
Earlier this year in an effort to focus on its Donlin Creek project with Barrick Gold (NYSE: ABX ) , the gold miner spun off its Ambler copper operations into NovaCopper, sold its Rock Creek property in Alaska, and is looking to sell its 50% stake in the Galore Creek project that it owns with Teck Resources. It seemed like a smart thing to do at the time considering the prospects for success attached to Donlin Creek, but now the entire premise is collapsing.
Barrick says the project doesn't meet its investment criteria; because of the large capital infusions it requires cost estimates spiral higher. They're still moving ahead with the permitting process in the event that it becomes a more economical decision later on, but right now they're going no further than that. As a 50% owner in the project, NovaGold could move ahead on its own, but it too says a decision doesn't have to be made for several years, so it won't be making any snap judgments, either, though it believes Donlin Creek is still worth pursuing.
Barrick has felt the pressure of a declining stock, which is off 40% from its 52-week highs. Last month it booted its CEO and his replacement is undertaking a review of all of Barrick's projects to focus on those that will give it the best returns. One they are moving ahead with is the Pueblo Viejo gold mine in the Dominican Republic that Barrick owns with Goldcorp (NYSE: GG ) .
NovaGold thus finds itself in a difficult position so it's not surprising its stock was hammered as it's clear investors placed as much emphasis on Donlin Creek as the miner did for future growth. With that in question now, can NovaGold survive? There had been some speculation earlier this year that Barrick would make a new offer for the miner, but that seems increasingly unlikely, too.
Considering there are now few catalysts for growth available to it, I'm rating NovaGold to continue underperforming on CAPS. I think yesterday's plunge is not the end of it, but you can tell me in the comments box below or on the NovaGold Resources CAPS page if you think there's a way to dig itself out of this hole.
Ready for a resurrection
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