August has been a blockbuster month for the stock market, with several major benchmarks having climbed to new all-time highs. The S&P 500 hit its first record since January, lifted by positive overall sentiment and hopes that calming geopolitical tensions might let investors focus on the strong U.S. economy and its favorable prospects.
Yet along with those gains has come continued volatility, and even among the biggest companies in the market, some have faced substantial setbacks that have caused their shares to fall 15% or more in August. As of today, Hanesbrands (HBI +0.00%), Dentsply Sirona (XRAY 2.75%), and Noble Energy (NBL +0.00%) have been the worst-performing members of the S&P 500 so far this month, and below, you'll learn more about how they got there and what's ahead for their respective businesses.
HBI Total Return Price data by YCharts.
Losing a key partner
Hanesbrands came into August on an upswing, as the volatile stock had enjoyed recent popularity. Following a favorable investor conference in May, shareholders swarmed into the stock, pushing its shares up more than 20% in June on hopes that the maker of underwear and other apparel would be able to boost its cash flow generation and deliver stronger earnings growth over the next several years.
Those gains reversed themselves early this month, when Hanesbrands reported its second-quarter financial results. CEO Gerald Evans Jr. cited "the challenging environment for intimate apparel" in holding back its recovery to some extent, but he remained confident that Hanesbrands' turnaround plan could gain momentum throughout the rest of 2018.
Image source: Hanesbrands.
The problem, though, is that Hanesbrands got bad news that will affect its long-term prospects. Target told Hanesbrands that it will likely not renew a contract covering the C9 by Champion brand when it expires in early 2020. The underwear maker still has high hopes for Champion, but investors are a lot more nervous about whether Hanesbrands can thrive in highly competitive market.
Acquisition aftermath
You'll likely find Dentsply Sirona's products all over your dentist's office on your next visit, with items ranging from x-ray machines to reclining chairs and movable dental sinks. But even though the dental industry has seen dramatic innovation, Dentsply hasn't participated in it well, and a lot of its woes tie back to its $5.5 billion acquisition of industry peer Sirona a couple of years ago.
Near the beginning of the month, Dentsply reported its second-quarter results, and it had to take yet another impairment charge related to the Sirona acquisition, this time totaling $1.265 billion when you add in both other intangible assets and goodwill. Although adjusted earnings were slightly better than expected, Dentsply also cut its earnings guidance for the full year by about 20%, and shareholders responded by hitting the stock by about the same amount. The dental specialist has promised a broader-based restructuring program, but CEO Don Casey admits that the current environment has left Dentsply "clearly not satisfied with our performance." Investors have to agree, and it'll take strong measures to lead to a recovery.
Ignoble results
Finally, Noble Energy has suffered a substantial decline this month, also after reporting earnings early in August. The energy company has had a big presence in the Permian Basin, where it's attempting to take advantage of production opportunities made possible by technological innovations in the industry. Yet the rush of activity in the Permian has left it with inadequate infrastructure assets to transport energy products out of the region, and that's been a key reason why domestic oil prices have seen a recent pause in their ascent.
Noble Energy responded by saying that it would move some of its investments beyond the borders of the Permian, looking instead at areas like the Denver-Julesburg Basin in Colorado. That in turn resulted in guidance toward the lower end of Noble Energy's previous production targets, disappointing investors. With drilling costs also on the rise, Noble Energy needs to see the transportation situation in the Permian resolve itself quickly if it wants to focus on its highest-potential projects.
Can these stocks bounce back?
One month's returns don't necessarily mean much for a stock, but big losses do signal challenges that companies need to overcome. The moves for Noble Energy, Dentsply Sirona, and Hanesbrands this month reflect larger strategic obstacles that will take time to overcome. Investors will need to see clear signs of progress from these companies, though, before they're likely to see a big bounce in their stock prices.
