Why ConAgra Foods, La-Z-Boy, and Outerwall Tumbled Today

Stocks closed sharply higher on Wednesday, with the Federal Reserve continuing to pull back from its quantitative easing program in anticipation of a healthier economic environment in the future. Even though some investors focused on slightly changed forecasts about the pace of future increases in the Fed funds rate, the general consensus appears to be that the Fed remains committed to keeping monetary policy accommodative for the foreseeable future. Still, not all stocks celebrated the news, and ConAgra Foods (NYSE: CAG  ) , La-Z-Boy (NYSE: LZB  ) , and Outerwall (NASDAQ: OUTR  ) all fell on the day.


Source: Wikimedia Commons.

ConAgra Foods dropped 7% as the agricultural giant warned that its income for the fiscal fourth quarter will fall short of what the company had expected previously. ConAgra shaved a nickel per share off its adjusted earnings estimate, with weakness coming from both sides of its business. On one hand, revenue from its consumer-food division wasn't as strong as it had expected. But the private-label food business it obtained from its merger with Ralcorp a year and a half ago has also had trouble producing the solid profits shareholders wanted to see. Analysts followed with downgrades, and ConAgra will have work to do to restore investor confidence in next week's formal earnings release.

La-Z-Boy sank 8% after the furniture company's earnings were the latest casualty of winter weather. La-Z-Boy said that its fiscal fourth-quarter same-store sales dropped by 0.9%, which was the first decline in comps in years. Moreover, La-Z-Boy expects future costs to rise, with raw materials such as leather and plywood seeing price pressures that could hurt margins going forward. La-Z-Boy has responded with price increases of its own, but with the choppiness of the economic recovery, it's unclear whether the company can make those gains stick. With the slow summer period coming, La-Z-Boy shareholders might have to wait a while to see a full recovery in the stock price.

Source: derrickcollins, Flickr.

Outerwall fell 6% in response to an analyst downgrade of the company behind the Redbox and Coinstar kiosks. The concern that Outerwall has to address is whether the movie-rental business will remain a viable profit-generator in light of the rising adoption of streaming video services. In order to keep growing, Outerwall needs to convince customers of the value proposition of physical media for entertainment over streaming, and that is increasingly becoming a tougher sell to tech-savvy consumers. Outerwall stock trades at a cheap earnings multiple, but that might just reflect fears that earnings might contract in future years despite analyst expectations to the contrary.

Your cable company is scared, but you can get rich
You know cable's going away. But do you know how to profit? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names.

 


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2999804, ~/Articles/ArticleHandler.aspx, 9/1/2014 3:59:03 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement