Today's stock market
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Long-term interest rates slumped, hurting the financial sector, but helping rate-sensitive real estate stocks. The Financial Select Sector SPDR ETF (NYSEMKT:XLF) dropped 1.5%, but the Vanguard REIT ETF (NYSEMKT:VNQ) closed up 1.2%.
Alcoa hurt by trade tariffs
Shares of Alcoa sank 13.3% after the aluminum producer beat profit estimates for its second quarter but lowered guidance for full-year profit, blaming the impact of tariffs on aluminum imposed by the Trump Administration. Revenue increased 25.2% to $3.58 billion and adjusted earnings per share soared 145% to $1.52, well above the $1.32 per share analysts were expecting. Alcoa altered its outlook for full-year adjusted EBITDA to a range of $3.0 billion to $3.2 billion, a decrease of $500 million from guidance given three months ago.
Favorable market prices were responsible for the big jump in profit. Adjusted EBITDA was $904 million, up $251 million from the first quarter. Higher alumina and aluminum prices along with the effect of a stronger dollar added $365 million to the sequential increase.
Tariffs were supposed to help the domestic aluminum industry, but Alcoa is seeing a negative impact. Since the company has smelters located in Canada, it had to pay $15 million in tariffs in June, and expects to pay between $12 million and $14 million every month as long as tariffs are in place. CEO Roy Harvey pointed out that even if all unused capacity in the U.S. were brought back on line, the additional supply will still be small compared with imports, and the plants that have been shuttered were the inefficient ones, anyway. The company is also concerned that the tariffs will hurt domestic demand for aluminum in the long term.
Uncertainties in the market due to the fluid tariff situation, plus the fact that aluminum prices have already fallen over 20% since their peak in April, led to a reduction in Alcoa's profit outlook -- and a big drop in the stock today.
eBay reports uninspiring results, lowers revenue outlook
Investors auctioned off eBay stock after the company turned in mixed results for the second quarter and lowered full-year revenue guidance, sending shares down 10.1%. Net revenue grew 9.1% to $2.64 billion, missing expectations for $2.66 billion. Adjusted earnings per share jumped 17.8% to $0.53, $0.02 better than the analyst consensus.
Excluding currency effects, revenue grew 6% on a 7% increase in gross merchandise volume. Non-GAAP operating margin fell to 25.2% from 26.4% in the period a year earlier, due to investments in payments, marketing, and Japan. The number of active buyers grew 4% to 175 million, a deceleration from recent quarters.
Looking forward, eBay reduced full-year revenue guidance to a range of $10.75 billion to $10.85 billion, from its previous range of $10.9 billion to $11.1 billion. The company raised its non-GAAP EPS guidance from $2.25-$2.30 to $2.28-$2.32, thanks to a lower-than-expected tax rate.
eBay's results had investors pondering whether the company is experiencing a longer-term slowdown in growth, and some were certainly ready to dump the stock today.