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Stock Market Today: Ford Slumps and GrubHub Soars

By Demitri Kalogeropoulos – Jul 28, 2016 at 6:05PM

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Earnings reports produced large price swings in these stocks as broader markets barely budged on Thursday.

Stocks fell in early trading Thursday before spending the rest of the trading session ticking higher toward a mixed close. By 4 p.m. EDT, the Dow Jones Industrial Average (^DJI 0.08%) had declined by 16 points, or 0.1% as the S&P 500 (^GSPC 0.25%) logged a slight gain.

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Source: Yahoo! Finance.

As for individual stocks, Ford (F 2.71%) and GrubHub (GRUB) both grabbed headlines and generated heavy trading on Thursday as investors digested the companies' latest earnings announcements.

Ford's shaky outlook

Ford was one of the S&P 500's biggest decliners, falling 8% in the wake of its second-quarter earnings report. Sales and profits both slipped as the automaker struggled with what CEO Mark Fields described as a few "new risks and market challenges around the world."

Image source: Ford.

To be sure, there were several bright spots in this report. The European market delivered its best ever second quarter by generating nearly $500 million of pre-tax profit. Market share ticked higher in the U.S. as well, thanks in part to strong demand for the F-150 pickups. However, profitability fell in that market as Ford had to ramp up sales incentives. In an investor presentation, executives said they were seeing signs that the demand recovery in the U.S. was "maturing."

A few outside markets, including China and Brazil, also produced weakening growth and lower profitability. Taken together, these new challenges raise the risk that Ford might not meet its aggressive 2016 sales and profit growth targets. "It was one of our best second quarters ever," Fields told investors in a conference call, "but at the same time, we now see a number of risks that the Ford team is working hard to mitigate." Given that Ford still expects to post record results this year, the stock's decline looks like an overreaction to what appears to be a short-term speed bump.

GrubHub's spiking profits

Food delivery specialist GrubHub soared 24% after its second-quarter sales and profit growth wowed investors. Sales spiked by 37% to far outpace the 30% pop Wall Street was expecting. GrubHub posted a 23% jump in daily meal sales and an even larger boost in gross food sales, which management credited to a branding reboot and an enhanced shopping experience for users.

Image source: Getty Images.

"Product improvements, our delivery initiative and an updated brand drove better diner growth and significantly higher engagement in the second quarter," CEO Matt Maloney said in a press release. "We posted record net revenues and our best order growth in a year."

Better yet, GrubHub was able to fully capitalize on that extra demand. Net income rose by 38% to $13 million, despite major new investments in product development and sales support. The fact that profitability is climbing while new spending priorities are being met shows off "the powerful economics of scale in our business," according to Maloney.

Executives backed up that optimistic talk with an aggressive outlook. Maloney and his team see revenue improving to $484 million in 2016, while consensus estimates were eyeing something closer to $475 million. Adjusted earnings should rise to $140 million, or 33% above 2015's result, which helps explain why investors are paying such a high earnings premium for GrubHub shares right now.

Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Ford. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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