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Why Kroger, Pivotal Software, and WageWorks Slumped Today

By Dan Caplinger - Sep 13, 2018 at 3:47PM

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Two of them disappointed investors with their most recent earnings, but worries about the other stemmed from numbers reported in previous years.

Thursday was a generally good day on Wall Street, with major market benchmarks moving higher. Market participants were pleased to see the U.S. and China making at least minor progress toward renewing trade talks that might eventually reverse the recent escalation of tariffs imposed between the two countries. Yet even as the broader market rose, challenging company-specific news sent some major businesses' shares lower. Kroger (KR 0.60%), Pivotal Software (PVTL), and WageWorks (WAGE) were among the worst performers on the day. Below, we'll look at them more closely and explain why their stocks did so poorly.

Kroger's efforts fall short

Kroger dropped 10% after it reported its second-quarter financial results. The largest U.S. supermarket chain operator said its revenue rose by just 1%, with a decline in operating profit from year-ago levels getting offset by a one-time gain and the impact of corporate tax cuts. Management was happy about the 1.6% rise in identical-store sales excluding fuel, but despite CEO Rodney McMullen's enthusiasm about the progress of the Restock Kroger initiative, shareholders were dissatisfied with Kroger's narrower margins. With competition remaining fierce in the grocery arena, Kroger can't afford to fall behind in its efforts to adjust to changing industry conditions.

Blue and white Kroger logo.

Image source: Kroger.

Pivotal has investors in a panic

Shares of Pivotal Software plunged 20% in the wake of the cloud platform specialist's release of its second-quarter financial report. Pivotal's performance seemed strong on its face, including a 30% rise in total revenue propelled by a greater than 50% jump in subscription-based revenue. It brought in 19% more subscription customers in Q2, lifting its total to 354, and the company's adjusted net loss was cut nearly in half from year-ago levels as well. Yet the market wasn't satisfied with the pace of Pivotal's growth. From here, it'll be up to the company to convince skeptical investors that their knee-jerk selling reaction was unwarranted by its fundamental performance, if it can.

WageWorks makes some changes

Finally, WageWorks fell 18% after the benefits administration company gave an update on its review of previous years' financial data. The company said that while it expects to make a modest retroactive adjustment downward in the revenue it reported for its fiscal 2016, it hasn't yet seen anything in its ongoing review of its 2017 financials that leads it to expect that it will have to make a similar downward revision to that year's numbers. It also gave guidance for 2018, including a forecast for revenue growth in the 1% to 4% range, led largely by increased interest in health savings accounts. WageWorks also said that two of its directors, including the executive chair, had resigned, effective last week, and the company replaced the departing Joseph Jackson with new executive chair Stuart Harvey. All in all, investors seem to be awaiting more clarity about WageWorks' prospects.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

The Kroger Co. Stock Quote
The Kroger Co.
KR
$47.21 (0.60%) $0.28
WageWorks, Inc. Stock Quote
WageWorks, Inc.
WAGE
Pivotal Software Stock Quote
Pivotal Software
PVTL

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