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Why Community Health Systems, O'Reilly Auto Parts, and Cliffs Natural Resources Slumped Today

By Dan Caplinger – Oct 27, 2016 at 5:05PM

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These stocks fell much further than the market. Find out why.

Thursday brought modest losses to the stock market, with the Dow and S&P 500 finishing the day down between 0.1% and 0.3%. However, many individual stocks posted much larger losses, and Community Health Systems (CYH 1.66%), O'Reilly Auto Parts (ORLY 0.89%), and Cliffs Natural Resources (CLF 1.33%) were among the hardest-hit stocks in the market. Below, we'll tell you why these three stocks were among the worst performers on the day.

Image source: Cliffs Natural Resources.

Community Health gets cut in half

Community Health Systems saw its stock lose almost half of its value today after the hospital company issued a warning about its third-quarter earnings. The company said that it expects to report revenue of $4.38 billion, which is down almost 10% from the year-ago period.

Even worse, Community Health said that it believes adjusted earnings from continuing operations will show a loss of $0.35 per share, surprising those who were looking for a profit of nearly that much. Between a failure to cut costs as much as expected, reduced reimbursements from government programs, and lower patient volume, Community Health will have to redouble its efforts if it wants to have any chance of regaining the confidence of hard-hit investors.

O'Reilly hits a speed bump

O'Reilly Automotive fell 9% in the wake of its third-quarter financial report Wednesday afternoon. The auto-parts company said that sales rose 7%, sending net income up 5% and reporting earnings of $2.90 per share. Those results weren't quite as good as most investors had expected, and O'Reilly also said that fourth-quarter results would likely come in between $2.44 and $2.54 per share on comparable store sales growth of 3% to 5%.

Full-year 2016 guidance also looked weaker than investors wanted to see, including revenue of between $8.5 billion and $8.6 billion, comps growth of 4% to 5%, and earnings of $10.58 to $10.68 per share. With many market participants worried about the state of the auto industry more generally, O'Reilly will have to work to dispel fears that this quarter's performance is just the beginning of a less favorable trend for the retailer.

Cliffs Natural leaves investors at a loss

Finally, Cliffs Natural Resources plunged 18%. The iron ore producer reported in its third-quarter report that revenue fell 7% from year-ago levels, and the company failed unexpectedly to post a profit during the quarter. Instead, further losses resulted from weak sales of iron ore in the U.S., and even though the company issued fairly solid guidance both for its domestic and its Asia-Pacific markets for iron ore, some investors are skeptical that Cliffs can hold up well in a tough steel market.

Until conditions among the steel companies that buy iron ore from Cliffs become clearer, it will be hard for Cliffs Natural stock to build a lot of positive momentum.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool owns shares of Cliffs Natural Resources and O'Reilly Automotive. 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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