Stocks made modest gains on Thursday as the market digested a spate of earnings reports that were generally positive. The Dow Jones Industrial Average (^DJI 0.31%) and the S&P 500 (^GSPC -0.07%) both closed at record highs.
Today's stock market
| Index | Percentage Change | Point Change |
|---|---|---|
| Dow | 0.54% | 140.67 |
| S&P 500 | 0.06% | 1.71 |
Data source: Yahoo! Finance.
Utility stocks rebounded today, with the Utilities Select SPDR ETF (XLU -1.49%) up 1.6%. Transportation stocks were the big losers as the airlines continued recent weakness; the iShares Transportation Average ETF (IYT -0.76%) fell 1.6%.
As for individual stocks, Varian Medical Systems (VAR) made a big move after the company reported a strong sales gain, and Newell Brands (NWL -1.83%) got crushed due to disappointing results and plans to sell off brands.
Image source: Getty Images.
Varian reports sharply higher sales
Varian Medical Systems, a supplier of cancer radiation therapy equipment, announced fiscal first-quarter results that beat expectations, and shares jumped 12.4%. Revenue from continuing operations grew 12.8% to $679 million, more than twice the 5.9% growth analysts were looking for. Non-GAAP earnings per share came in at $1.06, compared with $0.50 in the quarter last year and the $0.93 Wall Street was expecting.
Gross orders were up 14.6% to $666 million, thanks to strong oncology orders in Europe, the Middle East, and Africa. On a GAAP basis, Varian posted a loss of $1.22 per share, mostly due to a one-time charge related to the new tax law.
Looking forward, the company raised its guidance for full-year revenue growth from the 2% to 4% range given three months ago to a range of 4% to 7%. Non-GAAP EPS guidance was raised from $4.20 to $4.32 to a new range of $4.24 to $4.36, assuming a tax rate of 21%, compared with a prior assumption of 23%.
Analysts on the call struggled with reconciling the double-digit revenue performance for Q1 and relatively strong orders with the guidance for full-year top-line growth of only 4% to 7%. Varian's business is naturally lumpy, but today's big move may imply investors are concluding the guidance is conservative.
It keeps getting worse for investors in Newell Brands
Newell Brands -- maker of consumer goods with well-known brands such as Rubbermaid, PaperMate, and Mr. Coffee -- today announced preliminary 2017 results, gave initial guidance for 2018, and said it will attempt to sell off a number of its brands. Shares plummeted 20.6% in response.
Newell estimates that full-year non-GAAP EPS will be between $2.72 and $2.76, below previous guidance of $2.80 to $2.85, and missing analyst expectations of $2.81. Core sales growth was 0.8% compared with guidance of 1.5% to 2%. Looking ahead to 2018, the company expects EPS to be between $2.65 to $2.85, while Wall Street was expecting $2.94.
Newell's new transformation plan will aim for a slimmed-down company with about $11 billion in sales, compared with the $14.8 billion analysts had been expecting in 2017. The company will be looking for buyers of its industrial and commercial products, along with smaller consumer businesses. After the transactions are complete by the end of 2019, Newell expects a 50% reduction in the company's global factory and warehouse footprint.
Following a disastrous third quarter that came in worse than expected even after the company had lowered expectations, today's bad news was just the latest in a string of disappointments that have chopped the company's stock price in half since last June. Shrinking in order to grow may be the solution, but at this point, investors aren't ready believe the worst is over yet.