After several straight sessions hovering near all-time highs, U.S. stocks pulled back on Wednesday as a number of underwhelming earnings reports stoked concerns over the health of the broader economy. Both the Dow Jones Industrial Average (DJINDICES:^DJI) and the S&P 500 (SNPINDEX:^GSPC) posted losses, with the most pronounced drops coming from the oil and industrial sectors.
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Lowered outlook spooks CSX investors
Shares of CSX plunged 10.3% -- making it the worst-performing stock in the S&P 500 -- after the rail-based freight transporter announced disappointing quarterly results and lowered its full-year outlook.
CSX's second-quarter revenue fell 1% to $3.06 billion, translating into a similar decline in net earnings to $870 million. Thanks to stock repurchases over the past year, however, earnings per share climbed 7% year over year to $1.08. Still, most analysts were anticipating higher earnings of $1.10 per share on revenue closer to $3.14 billion.
"Both global and U.S. economic conditions have been unusual this year to say the least, and have impacted our volumes," explained CEO James Foot during the subsequent conference call. "The present economic backdrop is one of the most puzzling I have experienced in my career."
As such, CSX now expects revenue to decline 1% to 2% for the full year, down from its previous guidance for 1% to 2% growth.
"We are not necessarily being pessimistic about the second half of the year," Foote added. "This outlook is based on the current business levels and there is upside to this forecast if conditions improve in the second half."
Cintas dresses a solid beat
Shares of Cintas gained 8.7% -- making it the best-performing stock in the S&P 500 -- in the wake of an impressive fiscal fourth-quarter 2019 report. The uniform rental and office supplies company saw revenue climb 7.4% to $1.79 billion, translating into net income from continuing operations of $226.2 million, or $2.06 per share, up 22.6% from the year-ago period. Analysts were only looking for earnings of $1.93 per share on revenue of $1.78 billion.
Cintas achieved impressive 6.8% organic revenue growth (which excludes acquisitions and the impact of foreign currencies) from its uniform rental and facility services segment, and even better 10.7% growth from its first aid and safety services business.
Chairman and CEO Scott Farmer said he was "pleased" with the quarter, which wrapped up a "very successful year." Farmer noted this was the company's ninth straight year of organic revenue growth in the mid- to high-single-digit range.
Assuming the U.S. economy stays healthy, Cintas expects full-year fiscal 2020 revenue of $7.24 billion to $7.31 billion -- up 5.6% at the midpoint -- with earnings per share from continuing operations increasing around 10% to a range of $8.30 to $8.45. Most analysts were expecting earnings near the low end of that range on revenue of roughly $7.29 billion.