2 Big Stock Winners From a Horrible Day on Wall Street

The stock market had a tough outing on Wednesday, as investors reacted negatively to uncertainty stemming from the midterm elections and prepared for the latest readings on inflation due out early Thursday. Losses for the Dow Jones Industrial Average (^DJI -0.65%), S&P 500 (^GSPC -1.20%), and Nasdaq Composite (^IXIC -1.79%) ranged from 2% to 2.5%.

Data source: Yahoo! Finance.

With this backdrop, plenty of stocks posted sharp declines. However, there were a couple of prominent stock winners that posted huge gains in shareholders' favor. Below, you'll learn more about why Outset Medical (OM -0.49%) and Axon Enterprise (AXON -2.41%) were among the top gainers on Wall Street on Wednesday.

Outset soars, despite wider losses

The big winner among stocks on Wednesday was Outset Medical, as its shares soared almost 30%. The maker of dialysis equipment reported financial results that were far from perfect but still managed to impress shareholders who had feared that the company could do worse than it did.

Outset's sales performance was solid. Revenue of $27.8 million in the third quarter was up 5.5% from year-ago levels and nearly an 11% boost when compared to three months ago. Gross margin improved markedly, rising from 11.2% to 15.6% in just 12 months.

The company resumed shipments to new home patients during the period after a regulatory hold earlier in the year. It also saw adoption of its Tablo hemodialysis system expand well beyond its own expectations during the quarter.

Surging operating expenses, however, weighed on Outset's bottom line. Adjusted net losses widened by $0.11 per share to $0.70, with sizable increases in spending on research and development, as well as in sales and marketing expenses. Nevertheless, investors found Outset's boost of its full-year 2022 guidance encouraging.

The dialysis specialist now expects sales to grow 8% to 10% for the year, with a new range of $111 million to $113 million. That compares favorably to its previous projections for between $105 million and $110 million in 2022 sales. Even though the growth stock remains down more than 60% since the beginning of 2022, the results seemed to signal that a possible turnaround for Outset is in the works.

Axon shoots, scores

Elsewhere, Axon Enterprise was up almost 15% on Wednesday. The maker of stun guns and camera equipment for law enforcement and other applications jumped after reporting record revenue in the third quarter and boosting its full-year outlook.

Axon saw considerable growth in the quarter, with sales climbing 34% year over year to $312 million. The company pointed to its software and sensors segment as a notable contributor to overall growth. Although Taser segment sales were up 19% from year-ago levels, a 51% rise in Axon Cloud net sales helped drive Axon forward, along with rising interest in shipments of in-car cameras and body cameras.

Where Axon didn't do as well, though, was on its bottom line. Adjusted net income fell 49% to $43.5 million, resulting in adjusted earnings of $0.60 per share. Even with solid gross margin performance, the loss of a sizable income tax benefit in the year-earlier period obscured a substantial rise in operating income over the past 12 months.

Shareholders celebrated Axon's higher 2022 guidance, now expecting 34% year-over-year sales growth to finish between $1.15 billion and $1.16 billion. The company also increased its projections for adjusted pre-tax operating earnings and sees adjusted free cash flow at the top end of its previous guidance. With such a strong view in such a difficult business environment, it's not surprising to see Axon shares respond positively -- even as the stock price has doubled just since June.