Why ExOne, Cato, and Walter Energy Tumbled Today

The stock market managed to rebound Thursday, as investors apparently believed that yesterday's drop after the Fed meeting was overblown. Yet, these three stocks still posted substantial losses. Find out why here.

Mar 20, 2014 at 8:30PM

On Thursday, the stock market managed to regain much of the ground it lost after yesterday's shock from the Fed, as market participants started to discount just how likely it was that interest rates would rise as quickly as Fed Chair Janet Yellen's comments suggested yesterday. Yet, even though the Dow was substantially higher today, the good mood wasn't enough to lift shares of ExOne (NASDAQ:XONE), Cato (NYSE:CATO), or Walter Energy (NASDAQOTH:WLTGQ), all of which suffered big losses on the day.

ExOne fell almost 10% after the company reported its fourth-quarter earnings last night. The 3-D printing company saw sales of its printers fall 22%, and full-year overall revenue came in fully 20% weaker than its previous guidance had suggested. Moreover, ExOne pointed to further weakness in 2014, calling into question the company's potential for high growth. The problem ExOne faces is that its printers are very expensive. One way it's trying to address that situation is to make production service centers available where customers can use company-owned 3-D printers rather than buying their own outright. Nevertheless, the results show just how competitive the industry is right now, and ExOne needs to find ways to differentiate itself if it wants to win the 3-D war.

Cato dropped 13% as the women's apparel retailer reported disappointing earnings for the holiday quarter. Same-store sales fell 3%, contributing to an overall drop in revenue of 7%, and income fell by more than half. CEO John Cato blamed the results on the "continuing difficult economic situation our customers have faced," pointing to cost-cutting measures and internal investment to try to improve its results. Yet, with the company not expecting e-commerce efforts to have a significant impact on its results this year, investors clearly have a while to wait before they see the fruits of Cato's efforts.

Walter Energy plunged 20% as the struggling coal company dealt with fallout following negative sentiment from analysts at Bank of America. B of A cited depressed conditions for the industry going forward, with stagnant prices for metallurgical coal making Walter Energy's efforts to recover from its current cash crunch more difficult. Meanwhile, Walter Energy also announced that it had priced two new debt offerings, and the fact that it had to use payment-in-kind-toggle financing suggests potential trouble in raising capital. If industry conditions don't improve in the next several years, Walter Energy could face increasing difficulty, and that could create further losses for shareholders and bond investors alike.

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Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends ExOne and Cato. The Motley Fool owns shares of ExOne. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

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Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

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KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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