Stocks fell on Wednesday, with both the Dow Jones Industrial Average (^DJI 2.12%) and the S&P 500 (^GSPC 1.45%) indexes declining by more than 0.25%.
Today's stock market
|
Index |
Percentage Change |
Point Change |
|---|---|---|
|
Dow |
(0.29%) |
(59.44) |
|
S&P 500 |
(0.38%) |
(8.85) |
Data source: Yahoo! Finance.
Financial stocks underperformed the broader market as the popular Financial Select Sector SPDR ETF (XLF 2.18%) declined 0.8%. On the other hand, an uptick in gold prices produced solid gains for the second straight day for Direxion Daily Jr Gold Miners Bull 3X ETF (JNUG -4.52%), which rose 4%.
As for individual stocks, both Delta Air Lines (DAL 1.73%) and Fastenal (FAST 2.73%) attracted heavy investor interest following their quarterly earnings reports.
Image source: Getty Images.
Delta's improving outlook
Delta shares dipped 0.5% after the company posted quarterly results that included disappointing sales and profit growth -- but also a few tantalizing hints of a rebound ahead. Revenue per available seat mile fell 0.5%, missing management's guidance that called for an increase of 1% at the midpoint. Rising costs, especially on fuel, contributed to a sharp drop in profitability as operating income dove 32%.
Image source: Getty Images.
Yet the company believes that profitability will show solid improvements over the next three quarters of the year. It sees revenue speeding up and is encouraged by the fact that March was the first month of positive passenger unit revenue since November 2015.
Fuel costs aren't likely to pinch profits through the rest of 2017, either. "With an improving revenue profile and further improvement as our cost growth moderates in the second half, we are on track to expand margins for the balance of the year," Chief Financial Officer Paul Jacobson said.
Delta's guidance calls for operating margin to grow to between 17% and 19% in the fiscal second quarter as revenue per available seat mile rises 1% to 3%.
Fastenal's profitability dip
Shares of industrial supply specialist Fastenal lost 8% after the company announced fiscal first-quarter earnings results. Revenue improved 6.2% to reach $1.05 billion and earnings rose at the exact same pace to $0.46 per share. The actual sales figure was a hair higher than consensus estimates while Wall Street analysts were right on the mark with their EPS projections.
Fastenal executives said they were encouraged by a pickup in the industry following a relatively weak 2016 fiscal year. "We are pleased with the improving pace of business growth," CEO Dan Florness said. "This is a welcome sign of improving business activity and of the traction we are gaining in our growth drivers," he added.
One drawback of the success in these growth initiatives is that they tend to carry lower margins than the core business. That was a key factor behind a 40-basis-point decline in gross profit margin, to 49.4% of sales. But Fastenal managed to offset most of this drop through discipline around administrative and operational expenses. As a result, bottom-line earnings rose at a slightly faster pace than revenue, to $134 million.
Looking forward, investors can expect Fastenal to slowly shrink its store footprint as it continues to adjust to the weak industry conditions that marked last year's results. At the same time, it aims to aggressively invest in growth initiatives like its network of industrial vending machine sites, which could keep pressure on its profit margin.
