Please ensure Javascript is enabled for purposes of website accessibility

What Happened in the Stock Market Today

By Jim Crumly – Apr 11, 2018 at 4:59PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

On a day the major benchmarks declined, Fastenal fell on margin concerns and AeroVironment skyrocketed after an analyst upgrade.

Investor attention moved from trade wars to actual war on Wednesday, as stocks fell on concerns over the situation in Syria. The Dow Jones Industrial Average (^DJI -1.11%) and the S&P 500 (^GSPC -1.03%) both closed in the red.

Today's stock market

Index Percentage Change Point Change
Dow (0.90%) (218.55)
S&P 500 (0.55%) (14.68)

Data source: Yahoo! Finance.

Crude oil prices jumped to the highest they've been in over three years, boosting energy stocks. The SPDR S&P Oil & Gas Exploration & Production ETF (XOP -3.19%) added 1.8%. Financial stocks fell on a flattening yield curve, and the Financial Select Sector SPDR ETF (XLF -1.58%) finished down 1.2%.

As for individual stocks, Fastenal (FAST -0.88%) dropped after reporting first-quarter results, and AeroVironment (AVAV -3.37%) jumped on an analyst upgrade.

Candlestick stock graph.

Image source: Getty Images.

Fastenal reports sales growth but declining margins 

Industrial supply company Fastenal reported first-quarter results that met analyst expectations, but a drop in gross margin raised concerns with analysts, and the stock fell 6.2%. Sales grew 13.2% to $1.19 billion and earnings per share increased 30.6% to $0.61. Gross margin declined 73 basis points to 48.7% after having fallen 97 basis points in Q4. 

Fastener products grew 11.8%, helped by the acquisition of Manufacturers Supply Company in March 2017, which added 1.3 percentage points to the overall sales growth number. Sales of non-fastener products grew 14.5%. The company said that sales growth would have been even higher if it weren't for an abnormal number of route cancellations due to bad weather in the quarter. 

Operating income grew 10.4% in the quarter, and CEO Daniel Florness called that performance "frankly not horribly impressive" on the conference call. Despite an improvement in operating expenses as a percentage of sales, the decline in gross margin caused operating margin to decline 50 basis points. Florness blamed product cost inflation as well as increased freight costs for the drop in margin, as the company did not increase prices enough to offset the higher costs. He said that gross margin in Q2 would be comparable to or even slightly lower than the Q1 figure. Analysts on the call were also concerned about the impact tariffs could have on product costs, potentially adding to Fastenal's cost pressures.

Fastenal seems to be on reasonable growth trajectory, and company officials think there is room for price increases to offset costs. But investors focused on the margin issue today, taking the stock into negative territory for the year. 

AeroVironment takes off on analyst upgrade

Shares of military drone maker AeroVironment soared 17.1% to $54.28 after Stifel Nicolaus analyst Joseph DeNardi upgraded the stock to buy from hold and raised his price target from $45 to $65. DeNardi sees the company benefiting from improving spending trends at the Pentagon, increased global threats, and a "pipeline of opportunities" that is the strongest he has seen in 10 years of covering the company.

AeroVironment is seeing strong international demand for its family of small military drones. Just two days ago, the company reported a successful maritime test of an automated sensor-to-shoot system that pairs its Puma drone with its Switchblade loitering missile system to defeat fast-moving surface vessels approaching a host vessel. 

Today's advance allowed the stock to fully recover from the drubbing it took last month following the release of its fiscal third-quarter results. AeroVironment posted 20% sales growth, which was above expectations, but guidance for full-year sales of between $280 million and $300 million was more conservative than investors were expecting. The upgrade from Stifel lifted hopes for a strong tailwind for sales this year and the next, so worries about the top line receded.

Jim Crumly has no position in any of the stocks mentioned. The Motley Fool recommends AeroVironment. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Fastenal Company Stock Quote
Fastenal Company
FAST
$47.30 (-0.88%) $0.42
AeroVironment, Inc. Stock Quote
AeroVironment, Inc.
AVAV
$85.66 (-3.37%) $-2.99
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$29,260.81 (-1.11%) $-329.60
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
^GSPC
$3,655.04 (-1.03%) $-38.19
SPDR Series Trust - SPDR S&P Oil & Gas Exploration & Production ETF Stock Quote
SPDR Series Trust - SPDR S&P Oil & Gas Exploration & Production ETF
XOP
$114.83 (-3.19%) $-3.78
The Select Sector SPDR Trust - The Financial Select Sector SPDR Fund Stock Quote
The Select Sector SPDR Trust - The Financial Select Sector SPDR Fund
XLF
$30.56 (-1.58%) $0.49

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
329%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.