Today's stock market
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The sole bright spot in the market was the utility sector, as bonds rallied in a flight to safety. The Utilities Select SPDR ETF (NYSEMKT:XLU) rose 0.4%. The drop in long-term interest rates pummeled the financial sector, with the SPDR S&P Bank ETF (NYSEMKT:KBE) slumping 3.7%.
Guess? trounces sales and profit forecasts
Premium jeans retailer Guess? reported sales in its holiday quarter that blew away analyst expectations and the stock soared 28.3%. Sales increased 17.5% to $792 million, while analysts were expecting $756 million. Adjusted earnings per share rose 44% to $0.62, compared with the consensus forecast of $0.54.
The company continued to see weakness in its sales in the Americas, but strong growth in Europe and Asia more than compensated. Sales in Americas retail fell 7.2% in constant currency with a decline in comparable sales of 5%, while wholesale grew 0.9%. But Europe sales increased 24.1% in constant currency, and Asian sales boomed 33.1%. Gross margin improved 210 basis points from the period last year to 37.2%. Looking forward, the company forecast EPS for the current year to be $0.86 to $0.98, significantly above the $0.85 analysts have been expecting.
"I am pleased to report that the overall results of the fourth quarter finished above the high-end of our expectations, with higher sales, higher adjusted operating profit and higher adjusted earnings per share, said CEO Victor Herrero in the press release.
Investors applauded those results and the outlook for the year.
AbbVie sinks on weak cancer trial results
Shares of pharma giant AbbVie plummeted 12.8% after the company announced disappointing results from a cancer drug trial and stated that it will not seek accelerated approval of the drug, meaning that AbbVie will likely not see revenue from it in 2018, as previously expected.
The trial was a phase 2 test of rovalpituzumab tesirine, or Rova-T, in patients with relapsed/refractory small cell lung cancer that have already had two prior lines of treatment and whose tumors express high levels of a protein called DLL3. Twenty-nine percent of the patients in the study experienced tumor shrinkage, with an objective response rate -- meaning the proportion of patients with a confirmed response at least four weeks after the initial determination -- of only 16%. The median overall survival was 5.6 months. The numbers were weak enough for AbbVie to abandon plans for accelerated approval.
AbbVie has made a big bet on the platform that produced this drug, which targets cancer stem cells, a small subset of cancer cells that fuel the growth and spread of tumors. The drug came to AbbVie following its pricey $9.8 billion 2016 purchase of Stemcentryx, and the company has had high expectations for Rova-T despite some skepticism by observers and a low response rate in a phase 1 trial. AbbVie has said it thinks Rova-T could have the potential for $5 billion in peak revenue, and could be used to fight a wide variety of cancers, including metastatic melanoma and glioblastoma multiforme, as well as some prostate, pancreatic and colorectal cancers. Rova-T is in two other phase 3 studies for lung cancer, so this trial is not the death knell for the drug, but the setback is significant, and investors reacted accordingly.