Why salesforce.com, Booz Allen Hamilton, and PetSmart Tumbled Today

On Wednesday, stocks were generally higher, as investors reacted favorably to the latest release of minutes from the Federal Reserve's Federal Open Market Committee meeting. Many investors had worried that positive economic signs we've seen lately could lead the Fed to accelerate the eventual increase of short-term interest rates, but the minutes showed few signs of that possibility actually happening. Still, some stocks fell sharply, with salesforce.com (NYSE: CRM  ) , Booz Allen Hamilton (NYSE: BAH  ) , and PetSmart (NASDAQ: PETM  ) among the worst performers on the day.

Source: Salesforce.com.

Salesforce.com declined 5% after the maker of customer relationship management software reported earnings last night. At first glance, the release seemed positive, as the cloud-computing specialist saw revenue soar 37% from the year-ago quarter, and free cash flow nearly doubled. Moreover, salesforce.com said that it expects only slightly slower sales growth during the current quarter, with projections of around 34% to 35% growth in revenue and adjusted earnings climbing slightly on a sequential basis. Yet investors still remain unconvinced that Salesforce's sales and earnings growth is sustainable, and even though many analysts saw the share-price decline as a buying opportunity, Salesforce stock wasn't able to recover.

Booz Allen Hamilton dropped 9% as the management and technology consultant suffered declines in revenue and profit in its most recent quarterly report. Sales fell more than 9% for the quarter, accelerating a downward trend that brought full fiscal-year revenue down almost 5%. Adjusted net income was down more than 15% from the year-ago period, and Booz Allen expects further declines in the mid-single-digit percentage range for fiscal 2015. Some analysts noted that investors had grown accustomed to the $1 per share special dividends that Booz Allen at declared in each of the past two quarters, but the company chose not to repeat the special dividend, instead expecting to preserve capital for possible acquisitions. The move shows how important dividend policy is for shareholders right now, in the current low-interest rate environment.

PetSmart fell 8% after the pet-products retailer wasn't able to deliver the future guidance that investors had been looking for. First-quarter earnings jumped more than 6% from the year-ago quarter, but overall revenue was up only 1.1% on a 0.6% drop in same-store sales. Moreover, PetSmart said that it doesn't expect any same-store sales growth throughout 2014, showing the extent to which competition from online retailers has eaten into its pet-supply business. In response, PetSmart is trying to work on emphasizing value-added services that online retailers can't duplicate, hoping to lure customers into the store for pet services and then persuade them to buy products while they're there. For now, though, shareholders want to see proof of that strategy before they're willing to invest further.

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  • Report this Comment On May 21, 2014, at 9:08 PM, Decoy0527 wrote:

    SalesForce has no "earnings growth" because it has no earnings. What SalesForce calls "earnings" is actually net loss minus expenses that SalesForce does not consider to be an expense. In other words, SalesForce doesn;t need no stinking GAAP. They have SalesForce Accounting Principles.

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Related Tickers

7/24/2014 4:03 PM
BAH $21.24 Up +0.17 +0.81%
Booz Allen Hamilto… CAPS Rating: ***
CRM $54.06 Up +0.46 +0.86%
Salesforce.com CAPS Rating: *
PETM $70.77 Up +0.68 +0.97%
PetSmart CAPS Rating: ****

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