Stocks roared higher on Friday after a strong jobs report. Nonfarm payrolls grew more than expected, driven by new workers joining the workforce, yet wage inflation remained subdued. The Dow Jones Industrial Average (DJINDICES:^DJI) broke through 25,000 and the S&P 500 (SNPINDEX:^GSPC) added more than 40 points.
Today's stock market
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Big Lots reports small sales
Shares of discount furnishings retailer Big Lots tumbled 10.1% despite the company beating profit forecasts and raising the dividend, as investors focused on disappointing same-store sales and weak forward guidance. Adjusted earnings per share rose 13.7% to $2.57, significantly above the analyst consensus of $2.43, and the quarterly dividend was raised 20% to $0.30. Sales grew 4% to $1.64 billion compared to expectations for $1.66 billion, with the gain coming from an extra week in the quarter this year compared with the last.
Comparable-store sales fell 0.1% after the company had guided to a range of flat to 2% gains. On the conference call, management said the shortfall happened in mid-January and that weather played a role in the miss. Soft home products, such as flooring and bath, had mid-single-digit gains, and furniture had low-single-digit gains, but food sales and the electronics, toys, and accessories category saw declines.
Looking forward, the company forecast Q1 EPS in the range of $1.15 to $1.22, below analyst expectations of $1.31, and guided to comparable-store sales of flat to slightly negative. For the full year, Big Lots expects to earn $4.75 to $4.95 per share, while analysts had been thinking $4.94. Comparable-store sales for 2018 are expected to increase in the low single digits. The guidance caused investors to reset expectations, and that was reflected in the stock price decline today.
Finisar misses profit expectations
Finisar, a maker of components for high-tech optics systems, reported flat revenue and declining margins in its fiscal third quarter, missing analyst estimates for sales and profit and sending the stock price down 4.5%. Revenue was $332 million, about the same as the period last year, and non-GAAP earnings per share fell 66% to $0.20. Analysts were expecting EPS of $0.23 on revenue of $333 million.
Finisar reported an increase in demand for its 100 gigahertz tranceivers for use in data centers and for vertical-cavity surface-emitting lasers (VCSELs), the 3D sensors that are used for facial recognition in the iPhone X, resulting in a 3.7% sequential increase in revenue by its datacom segment. The telecom segment had a disappointing 12.3% sequential sales decline, though.
Non-GAAP gross margin continued a steep decline, coming in at 28.6% compared with 30.3% in Q2 and 37% in Q3 of last year. The picture for next quarter wasn't any better, with the company forecasting Q4 revenue of between $300 million and $320 million, compared with analysts' expectations of $333 million. Gross margin is expected to fall further to 27%-28%, and EPS will be between $0.09 and $0.15, while Wall Street had been expecting $0.21.
Given the miss and the downbeat guidance, the market reaction was actually rather subdued. Investors are looking forward to improvements in the second half, and growing demand for VCSELs, supported by a new factory for those devices coming on line later this year.