These 3 Stocks Were Caught in a Downdraft

Whoosh! The Dow Jones Industrial Average went soaring 175 points higher yesterday, as Ben Bernanke defended his bond buying program, and several economic indicators showed positive trends. Core durable goods improved and machinery, construction equipment, and computers jumped the most that they have in over a year. All of this sent the Dow to a five-year high.

Things didn't look so bright for the three stocks below, however, but don't go running over the cliff with them like a bunch of lemmings; their double-digit losses could just be a temporary situation. Let's first see whether they had good reason to fall, as panic-fueled routs can sometimes lead to excellent buying opportunities.

Company

% Change

Accretive Health (NASDAQOTH: ACHI  )

(21%)

First Solar (NASDAQ: FSLR  )

(13.8%)

GrafTech International (NYSE: GTI  )

(9.7%)

Recognizing trouble
Suggesting there are going to be re-statements coming in the foreseeable future, Accretive Health said it would be delaying the filing of its fourth quarter and full year 2012 results as it evaluates how it recognizes its contract revenues. While any changes it makes in timing won't have an impact on the total amount of money it received from the contracts, it might cause an increase in deferred revenue or other liabilities that it reported in prior periods. Accretive didn't say how far back in time the changes would go.

Not surprisingly, the company said it was withdrawing the financial guidance it had given back in November when it said it expected to earn in the midpoint between $0.23 to $0.27 per share in adjusted profits, based on net service revenues that would likely come in at the lower end of $948 million to $980 million. 

Accretive has been battling other demons, as well, over the past year, having agreed to stop doing business in Minnesota for two years because of improper collection tactics and trying to forestall Illinois from doing likewise. A financial re-statement certainly does nothing to help its case with investors.

Dark clouds overhead
Although First Solar was able to report its own fourth quarter results, it wasn't anything investors wanted to hear. While it beat analyst profit expectations, it fell far short on revenues, and its outlook for the coming quarter wasn't any better. It guided to just $650 million to $750 million in first quarter revenues, far below the $822 million that Wall Street was anticipating.

Yet, investors really shouldn't have been so surprised. I pointed out last month that it was diving headlong into a new line of business -- becoming a design-build construction firm for utility-scale solar power plants -- because its components segment was struggling badly. It's full-service EPC division has now grown to comprise the largest segment of its operations, with almost $2.2 billion in revenues, a 165% increase over 2011, while its  components segment revenues declined by almost 40% in 2012, to $1.18 billion. 

With backlog slipping, analysts wonder whether it will be able to keep even its modest goal of replacing completed projects with new ones on a one-to-one basis . First Solar might not end up in last place, but it doesn't look like it's at the head of the class anymore, either.

Nerves of steel needed
Earnings were also at the heart of what sent GrafTech International lower. The graphite electrodes manufacturer reported that, with cheap Chinese competitors adding even more capacity to an industry already attempting to deal with an excess of it, the coming year appears as if it will be even more challenging. Despite being able to beat analyst expectations on the top and bottom line in a difficult environment, the fact that the future looks bleak didn't give investors any incentive to hang around.

The electrodes that GrafTech makes are used by the steel industry because they can withstand the high temperatures generated by the steel production process. GrafTech pointed out that China accounted for 65% of the 100,000 metric tons of new capacity that came online in 2012, and would likely be responsible for more than three quarters of the 130,000 metric tons of new capacity already announced and expected to come online over the next two years. 

With a steel industry struggling to recover profitability, the prospects for meaningful growth by GrafTech seem slim, and analyst downgrades helped push its stock lower. It would seem not even the Man of Steel himself can withstand the blowback that's arising from the Orient.

Ready for a resurrection

Investors and bystanders alike have been shocked by First Solar's precipitous drop over the last 12 months, and now the stakes have never been higher for the company. Are they done for good, or ready for a rebound? If you're looking for continuing updates and guidance on the company whenever news breaks, we've created a brand new report that details every must-know side of this stock. To get started, just click here now.

 


Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2286853, ~/Articles/ArticleHandler.aspx, 8/27/2014 3:20:31 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement