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U.S. economic growth improves, weekly jobless claims dip, and Northwest Biotherapeutics, Orthofix, and Conn's all soar by double-digits.
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Despite today's economic data being mixed, it predominantly leaned toward being better than expected. Yet, the broad-based S&P 500 (SNPINDEX: ^GSPC) still pushed lower on the day.
Perhaps no piece of economic data stood out more than the final estimate of U.S. fourth-quarter GDP, which grew by 2.6%, slightly higher than the second estimate of 2.4%, but also notably lower than the 4.1% GDP growth recorded in the third quarter. While 2.6% growth is on par for the course to keep this economic recovery on track, it also signals a strong enough growth rate that may not need the additional stimulus provided by the Federal Reserve on a monthly basis, known as QE3. Further tapering of this "free-money" program seems likely following today's GDP data, which has investors feeling pessimistic.
Also in the plus column, weekly initial jobless claims hit a four-month low, dipping 10,000 to a seasonally adjusted rate of 311,000. In addition to being well below economists' estimates, falling weekly initial jobless claims would imply that more people are finding work, and the job market is improving.
The one blemish for the day (surprise, surprise!) came from the housing industry, with pending home sales dipping 0.8% in February -- a steeper decline than the 0.2% drop noted in January. The housing industry has proven to be increasingly sensitive to interest-rate fluctuations, and the possibility that further cuts to QE3 could induce a rise in lending rates has investors clearly concerned.
By day's end, the S&P 500 had dipped by 3.52 points (-0.19%), its second straight day of losses, closing at 1,849.04.
Shrugging off the weakness, and leading the pack higher, was biopharmaceutical company Northwest Biotherapeutics (NWBO +0.14%), which popped 15.1% after issuing a press release before the opening bell that CEO Linda Powers will be presenting at the fourth-annual "Cancer Immunotherapy: A Long-Awaited Reality" conference in New York today. Specifically, Powers addressed the company's two main pipeline products, DCVax-L and DCVax-Direct, as well as discussed the cancer vaccine platform that helped them get to these therapies.
Excitement surrounding immunotherapies is incredibly high at the moment, and few have soared more than NW Bio, which received a hospital exemption approval in Germany earlier this month for a period of five years to treat all types of brain cancers with DCVax-L. What shareholders will really want to focus on, though, is the ongoing phase 3 trial of DCVax-L in glioblastoma muultiforme, the most aggressive type of brain cancer in the United States. The Food and Drug Administration is one of the more strict efficacy and safety health regulatory agencies around the world, and an approval in the U.S. could go a long way to validating its DCVax platform.
Source: Orthofix International.
Sticking within the health-care industry, orthopedic medical device maker Orthofix International (OFIX 0.01%) spiked higher by 14.5% after reporting its fourth-quarter results. For the quarter, revenue fell 10%, to $106.1 million, as BioStim revenue dipped 16%, and spine fixation segment sales dipped 13%. Orthofix also reversed a year-ago adjusted profit of $1.07 per share into a $0.60 per share quarterly loss. Overall, that probably doesn't sound too worthy of a 13% rise. However, Orthofix's CEO, Brad Mason, also noted that fiscal 2014's results should be stronger, and that Orthofix will be profitable once again by 2015 and 2016. While I'm glad to see the company slowly getting back on track, I'd rather wait for tangible profits before buying into this turnaround story.
Specialty products and appliance retailer Conn's (CONN +0.00%) also advanced by 13% after reporting favorable results in the fourth quarter. For the quarter, Conn's revenue grew a whopping 44.3%, to $361.1 million, as same-store sales expanded 33.4%. Furthermore, gross margin widened by 370 basis points, to 40.6%. Oddly enough, though, Conn's adjusted EPS of $0.74 actually missed Wall Street's expectations by $0.04. On the bright side, and what shareholders are really focused on, Conn's announced that its credit delinquencies had dropped from its credit segment, and it reaffirmed its fiscal 2015 forecast for a same-store sales increase of 5%-10%. However, in spite of Conn's being inexpensive on a forward-earnings basis, I still worry that the risk-versus-reward scenario favors more downside potential with the company.
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