Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.
The stock market enjoyed early gains Tuesday as positive data on the housing front helped make investors more optimistic, but by the close, most broad major-market averages had retreated to post only minimal gains. Yet even though the Dow and S&P 500 eked out new record highs, Nuance Communications (NUAN), JA Solar (NASDAQ: JASO) and Cracker Barrel Old Country Store (CBRL -14.47%) weren't so lucky and fell sharply on their respective earnings reports. Let's find out why these stocks got hit so hard today.
Nuance Communications plunged 18% despite narrowly beating expectations in its September-quarter report, delivering flat adjusted revenue compared to last year and adjusted net income that dropped 42% from the year-ago quarter. The disappointment for shareholders came from Nuance's future guidance, with Nuance now expecting adjusted earnings for its December quarter to post a 30% to 40% sequential drop from the September-quarter figures. The complicating factor in assessing the voice-recognition specialist's results is that Nuance has transitioned to a subscription-based model, giving up current revenue in exchange for more predictable streams of future income. The big question is whether users will find applications for Nuance's voice products, and if they do, the stock has plenty of room to rise.
JA Solar fell 10% as the Chinese solar company's quarterly results didn't stand up to the heightened expectations investors had. An 11% gain in revenue wasn't enough to offset the impact of a worse-than-expected adjusted loss, and investors were counting on JA Solar to match up better with its peers, many of which had much more encouraging reports recently. Despite reporting module shipments of 500 megawatts, beating its guidance for 470 megawatts, even substantial improvement in gross margins weren't enough to get JA Solar profitable. As the Chinese solar industry starts separating into winners and losers, JA Solar increasingly risks falling on the losing side of that fence.
Cracker Barrel dropped 7% after its quarterly report, which included a 17% jump in net income based on 3% revenue growth. Same-store sales on the restaurant side rose 2.8%, while retail comps picked up 2.5%. But guidance for the current quarter failed to catch up with more aggressive estimates from analysts, leading some to believe that the holiday quarter might not go well for Cracker Barrel. With Sardar Biglari in the wings waiting for a misstep, Cracker Barrel will need to execute better in order to keep the activist-investor wolves at bay.