Investors finally got in a bullish mood on Wall Street on Thursday, taking some solace from some high-profile earnings reports. As of 3 p.m. ET, the Nasdaq Composite (^IXIC -1.57%) was up more than 3%, bouncing back from its recent declines.
However, the good mood didn't lift every stock in the market. In particular, a couple of stocks released results that didn't live up to expectations, sending their shares lower. Below, we'll look more closely at why O'Reilly Automotive (ORLY -2.04%) and Align Technology (ALGN 0.33%) were both down sharply on such a strong day for the overall stock market.
O'Reilly breaks down
Shares of O'Reilly Automotive were down more than 10% on Thursday afternoon. The auto parts specialist reported first-quarter financial results that disappointed those who've looked favorably on what has been a healthy niche in the economy throughout the pandemic.
O'Reilly's growth slowed from its breakneck pace from last year. Revenue for the quarter was up 7% to $3.30 billion, with comparable store sales growth slowing to 4.8%. That was a solid gain, but it was far slower than the 24.8% gain in comps that O'Reilly enjoyed this time last year. The company blamed inclement weather for part of its sluggish start to 2022, arguing that winter conditions early in the season and a slow start to spring weighed on consumer demand.
Higher costs also hurt O'Reilly's bottom line. Net income was down 4% to $482 million, and that produced earnings of $7.17 per share. That wasn't quite good enough to satisfy shareholders.
O'Reilly is betting that by appealing to professionals with a special pricing initiative, it will be able to boost its market share and take better advantage of its entire business opportunity across the industry. That might be true, but if the company can't overcome inflationary cost pressures in the process, then investors might not be willing to put up with the corresponding hit to margins and profitability.
Align takes a punch in the teeth
Meanwhile, shares of Align Technology dropped more than 15%. The orthodontic device-maker's quarterly results also raised questions about its longer-term growth prospects.
Align wasn't able to keep up the pace of its past gains on key business and financial metrics. Quarterly sales were up just 9% to $973 million, and Invisalign case volumes rose by just 3,000 to 598,800. Although teenage patient unit volume rose more sharply, that suggested that the company's core adult audience saw pullbacks. Growth in its clear aligner, imaging systems, and CAD/CAM services units also continued to rise but at rates that fell short of what many investors wanted to see.
Align blamed several factors. Globally, the COVID-19 pandemic continued to weigh on results, especially with China's zero-COVID policy. Moreover, inflation weakened consumer sentiment and made people less willing to commit to treatment regimens. With Align getting half its business from outside the U.S., a strong dollar also hurt the company's financial results.
CEO Joe Hogan remains confident that the long-term prospects for Align remain strong, with the orthodontic specialist claiming less than 10% market share. However, with the war in Ukraine and macroeconomic pressures hurting the overall consumer environment, it might take some time for Align to return to its intended target of 20% to 30% revenue growth per year.