The mood was negative on Wall Street on Wednesday, and most major benchmarks finished in the red. Strength in the technology sector wasn't enough to lift more cyclically focused benchmarks like the Dow Jones Industrial Average, and the combination of an attack on Saudi Arabia that sent oil prices higher and some disquieting readings on the inflation front kept investors from feeling more confident about stocks going into earnings season. In addition, some individual companies had bad news that sent their shares lower. Analogic (NASDAQ:ALOG), QuinStreet (NASDAQ:QNST), and MSC Industrial Direct (NYSE:MSM) were among the worst performers on the day. Here's why they did so poorly.
Analogic makes a (bad) deal
Shares of Analogic dropped 13% after the imaging specialist accepted an offer from private equity company Altaris Capital Partners to buy it out. Stocks usually rise after getting acquisition bids, but the Altaris offer for $1.1 billion priced Analogic at just $84 per share, compared to the $96 per share closing price for the stock on Tuesday. Altaris justified the price by arguing that it represented a 25% premium to where Analogic traded nearly a year ago when it first announced its intention to seek strategic alternatives that could lead to a sale. Nevertheless, investors are highly disappointed that this was the best that Analogic could do, especially after announcing such strong earnings recently and given the generally favorable environment for tech stocks more broadly.
QuinStreet deals with an attack
QuinStreet stock plunged nearly 18% after getting criticism from an analyst company. Analysts at Kerrisdale Capital published a report explaining why it has chosen to sell shares of QuinStreet short, arguing that the price move in the internet marketing company isn't justified by the fundamentals of QuinStreet's business. Investors seemed to take Kerrisdale's accusations of "sham web traffic" seriously, along with assertions that revenue growth is coming primarily from a single source. Other analysts pointed out that Kerrisdale's criticism isn't new, but investors appear to be taking a second look at the impressive numbers that QuinStreet posted earlier this year.
MSC falls in sympathy
Finally, shares of MSC Industrial Direct finished lower by 4%. The distributor of metalworking, maintenance, repair, and operations products for industrial clients saw its stock fall under pressure from industry peer Fastenal, which reported quarterly results that didn't live up to investor expectations despite including a 13% rise in sales and substantial earnings growth. For its part, MSC's own results announced early Tuesday seemed solid, including a 9% rise in sales and double-digit percentage gains in pre-tax income even before accounting for the positive impacts of tax reform. MSC stock didn't move much yesterday, but shareholders today are apparently concerned that Fastenal's news signals a cyclical shift that could lead to slower growth for MSC as well.