Why Arch Coal, Medidata Solutions, and bebe stores Tumbled Today

Overall, first-quarter earnings season has gone well for the stock market, and Tuesday continued to bring more good news than bad to investors looking at the state of corporate America and its impact on the U.S. economy. Yet, even though the Dow and S&P 500 both rose by about 0.4% today, Arch Coal (NYSE: ACI  ) , Medidata Solutions (NASDAQ: MDSO  ) , and bebe stores (NASDAQ: BEBE  ) all fell sharply today, with bad news preventing them from participating in the broader market's rally.

Source:Flickr/Alison Christine.

Arch Coal fell 8% after its first-quarter earnings results included some disturbing forecasts. The coal-mining company posted a much-wider loss than investors had expected, as margins were pressured by the weak pricing environment. Prospects for the metallurgical-coal market look especially troubling and, in response, Arch Coal said that it would cut its 2014 met-coal output by about 1 million tons, or between 12% and 14%. At the same time, though, Arch Coal said that the market for thermal coal appears to be improving. Given that natural-gas prices have soared due to a cold winter and a move away from natural-gas production among energy exploration and production companies, a return to equilibrium for thermal coal is welcome news for the coal industry. Yet, given that Arch Coal has largely avoided the share-price losses that its coal peers have suffered this year, the questionable results likely prompted some rethinking of the bullish thesis for shareholders.

Medidata Solutions plunged 23% on its own negative earnings report, as the maker of cloud-based clinical-research tracking software fell short on adjusted earnings by almost a third, and missed revenue projections, as well. Medidata Solutions touted record revenues that grew 21% from the year-ago quarter, as well as a 26% boost in subscription revenue and a 43% jump in billings. But none of those results was strong enough to inspire confidence among the high-growth investors that had sent the high-flying stock to extraordinarily rich valuations. Although the long-term prospects for Medidata Solutions still appear bright, the question investors have to answer is whether the stock still prices in better future growth than the company is likely to deliver.

For bebe stores, Tuesday's 10% drop came after the retailer gave preliminary figures for its fiscal-third quarter. The women's apparel specialist blamed cold weather in warning that its quarterly loss would be larger than initially expected, as same-store sales fell 5.7% in leading overall revenue down 17%. Expectations for a net loss of $0.29 to $0.32 per share were about double what investors thought they would see, and bebe stores still faces pressure on its margins in light of high levels of inventory and the need for promotional discounting to drive traffic. Some of the decline comes from the fact that Easter was in a different fiscal quarter this year compared to last, but trends throughout retail make bebe stores' warning just another data point in a tough industry environment.

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