The stock market continued to lose ground on Wednesday, building additional downward momentum after several days of losses. Investors aren't entirely happy with how earnings season is going, as many companies are reporting solid results but predicting more difficult conditions down the road. Moreover, high-flying technology companies face geopolitical risks associated with trade that are difficult to predict and plan for, and that seems to be weighing on the entire market. Some individual stocks saw even sharper declines, and iRobot (IRBT 7.94%), Noodles & Co. (NDLS 3.83%), and Six Flags Entertainment (SIX) were among the worst performers on the day. Here's why they did so poorly.
iRobot reports tariff troubles
Shares of iRobot fell 12% after the company reported its third-quarter financial results. Backward-looking results for the maker of robotic vacuum cleaners were reasonably good, including 29% growth in revenue helping to power earnings per share higher by nearly half compared to year-ago figures. Yet despite the strong performance and positive words about iRobot's future prospects, shareholders instead seemed to focus on the potential negative impacts of tariffs, which the company predicted would represent about a $5 million hit. The stock's move highlights the extent to which investors are looking critically at tariffs, even in cases in which businesses haven't yet suffered a significant direct impact.
Image source: iRobot.
Noodles loses investors' confidence
Noodles & Co. stock plunged 25% in the wake of the release of the company's third-quarter report. At first glance, the restaurant chain seemed to do reasonably well, with a 2% rise in total revenue driven in large part by a 5.5% gain in comparable-restaurant sales across the system. Noodles also reversed a year-earlier GAAP loss and saw its adjusted net income more than double from year-ago levels. However, investors reacted negatively to the company's announcement that major shareholders will sell 8.75 million shares in a secondary stock offering. Even though Noodles won't get any money from the sale and the offering won't dilute existing shareholders, Noodles investors still see the move as expressing a lack of confidence in the noodle chain's long-term prospects.
No fun for Six Flags
Finally, shares of Six Flags Entertainment dropped 16%. The theme park specialist reported a 7% rise in sales during the third quarter of 2018, with attendance climbing to 13.6 million guests and a substantial gain in revenue from sponsorships and accommodations. Yet net income growth of 2% fell short of what investors had wanted to see, with Six Flags attributing the shortfall in part to a massive increase in cash operating costs for its parks. Six Flags was aggressive in acquiring five new theme parks in an effort to build out an even larger network of properties to encourage season pass sales, but the resulting hit to profit margin levels remains a challenge that the theme park operator will have to figure out how to handle more effectively in the months and years to come.
