Why Hertz Global Holdings, Diamond Foods, and Sears Hometown and Outlet Stores Tumbled Today

On Friday, the stock market posted another sizable gain, sending several major market benchmarks to new all-time record levels. In the absence of any downright bad news, investors have been willing to bid most stocks higher, and enthusiasm about the direction of the U.S. economy appears to be bolstering the bullish argument in favor of further investment in stocks. Yet, a few stocks nevertheless fell today, and Hertz Global Holdings (NYSE: HTZ  ) , Diamond Foods (NASDAQ: DMND  ) , and Sears Hometown and Outlet Stores (NASDAQ: SHOS  ) were among the weakest performers in the stock market on Friday.

Source: Hertz.

Hertz Global Holdings fell 9% after the rental-car giant announced that it would have to review and potentially restate three years' worth of financial reports in light of accounting errors that a recent audit found. As a result, Hertz said it would have to delay the release of its first-quarter results, which investors had hoped to see on Monday. With Hertz noting that doing the necessary work to correct the filings could take substantial amounts of time, shareholders were clearly uncomfortable with the uncertainty, even though it's unclear whether any changes will be particularly material to the car-rental company's overall results. Before the announcement, shares had jumped to all-time highs on news that Hertz would split itself into two parts, one to focus on rental cars, while the other deals with commercial equipment.


Source: Diamond Foods.

Diamond Foods dropped 11% after falling short in its earnings report today. The snack and nut producer managed to boost its revenue by 3.2% from year-ago levels, but that narrowly missed investors' expectations. On the earnings front, adjusted earnings per share were more than a third lower than shareholders wanted to see, and again, Diamond Foods saw a big disparity between its two main segments. With strength in the snack business, but weakness in nut sales, Diamond Foods needs to make tough decisions about how it wants to proceed in an environment in which nut costs are rising and cutting into profit margins.

Sears Hometown and Outlet Stores declined about 9%, as investors responded to an ugly earnings report. Same-store sales fell by 6.2%, sending overall revenue down nearly 2%, and cutting earnings per share by three-quarters. Sears Hometown joined the litany of other retailers citing the same negative factors as hurting its results, including bad winter weather, a cold early spring that hit lawn and garden sales in many areas, and extensive promotions among competitors that hurt the company's margins. The key for Sears Hometown will be whether it recovers once the weather improves this quarter, as the retailer will quickly run out of excuses if it can't deliver on growth promises in the near future.

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