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What Happened in the Stock Market Today

By Steve Symington – Dec 7, 2018 at 4:47PM

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On another down day for the markets, here's why Ulta Beauty plunged and Cronos Group soared.

Stocks fell on Friday thanks to a combination of a disappointing November jobs report and Chinese state media labeling the U.S. a "despicable rogue" for the recent high-profile arrest of Huawei CFO Weng Wanzhou, which spurred concerns over the status of ongoing trade talks between the two countries. Both the Dow Jones Industrial Average (^DJI) and the S&P 500 (^GSPC 0.89%) lost more than 2%.

Today's stock market

Index Percentage Change Point Change
Dow (2.24%) (558.72)
S&P 500 (2.33%) (62.87)

Data source: Yahoo! Finance.

Retail stocks led today's losers, with the SPDR S&P Retail ETF (XRT 0.36%) plunging 3.7%. Oil stocks climbed after OPEC agreed to a significant output reduction starting in 2019, and the SPDR S&P Oil & Gas Exploration & Production ETF (XOP 2.33%) rose over 4% early on before closing down 0.4%.

As for individual stocks, Ulta Beauty (ULTA 0.74%) fell on earnings news, and a massive investment by Altria (MO 1.65%) helped cannabis producer Cronos Group (CRON -4.10%) fly higher.

Falling stock charts superimposed over digital map of the world

Image source: Getty Images.

Ulta Beauty's ugly outlook

Shares of Ulta Beauty fell 13.1% -- making it the worst-performing stock in the S&P 500 -- after the beauty products retailer delivered solid third-quarter 2018 results, but followed with disappointing guidance.

Ulta Beauty's revenue climbed 16.2% to $1.56 billion, including a 7.8% increase in comparable-store sales. That translated into 25% growth in net income to $131 million, and a 28% increase in earnings per share to $2.18. Most investors watching the stock would have settled for earnings of $2.16 per share on roughly the same revenue.

"Ulta Beauty's strong performance in the third quarter reflects continued market share gains across all major categories, acceleration in our overall comp driven by healthy traffic, excellent new store productivity, and robust e-commerce growth," stated CEO Mary Dillon.

For the lucrative holiday quarter, however, Ulta Beauty expects revenue of $2.085 billion to $2.103 billion, assuming a comparable-sales increase of 7% to 8%, with earnings per share in the range of $3.50 to $3.55. In this case, even the high ends of both ranges fell below consensus predictions for fourth-quarter earnings of $3.62 per share on revenue of $2.12 billion. 

Altria's big cannabis bet

Cronos Group stock skyrocketed 21.7% after tobacco giant Altria revealed it will take a 45% equity stake in the Canada-based cannabis leader at a price of 16.25 Canadian dollars per share. That's good for an aggregate investment by Altria of roughly $1.8 billion.

Per the terms of the deal, Altria will have the right to nominate four of its own directors to Cronos' board, which will expand from five to seven members. Altria will also receive a warrant to acquire additional shares at a price of CA$19.00 per share exercisable over four years from the closing date of the transaction -- a move that would boost its stake to 55% if exercised in full.

"Altria is the ideal partner for Cronos Group, providing the resources and expertise we need to meaningfully accelerate our strategic growth," said Cronos Chairman and CEO Mike Gorenstein.

Steve Symington has no position in any of the stocks mentioned. The Motley Fool recommends Ulta Beauty. The Motley Fool has a disclosure policy.

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