The investing lumberjacks were out in full force with their chainsaws today, chopping down the broad-based S&P 500 (^GSPC +1.46%) after a number of key earnings reports failed to impress Wall Street.
On the economic data front, the only pertinent piece of information today was the final reading for the Thomson Reuters/University of Michigan consumer sentiment survey, which came in above expectations at 84.1 for April. This was actually its highest mark since July of last year and signifies that citizens are feeling more confident about their short and long-term economic outlook. A positive view could lend to more spending, and consumer spending contributes about 70% of U.S. GDP.
The primary sources of today's troubles, though, came from earnings reports. From automaker Ford to retail giant Amazon.com, few companies were spared the onslaught from skeptics today.
A final concern adding pressure to the markets was once again political tensions between Russia and Ukraine. With the potential for open combat seemingly back in the picture, investors have to be concerned that a global slowdown could affect their holdings. Even perennial growth diva Visa warned of weaker growth prospects in the offing because of sanctions against Russia and political tensions. This isn't a concern likely to disappear overnight, and ongoing sanctions against Russia may only exacerbate growth worries.
By day's end, the S&P 500 had been clobbered, turning in its worst single-day performance in two weeks and losing 15.21 points (-0.81%) to close at 1,863.40. Of course, there were still a few rays of sunshine amid the clouds.
Source: Janine, Flickr.
Shining brightest of all was over-the-counter health-care and household products developer and supplier Prestige Brands (PBH 2.58%), which jumped 18.1% after announcing the acquisition of privately held Insight Pharmaceuticals for $750 million. Perhaps best of all, the acquisition includes $100 million in tax attributes that Prestige can use to offset the purchase price. The deal will bring OTC yeast infection therapy Monistat, the EPT at-home pregnancy test, and a bevy of other feminine care products into Prestige's product portfolio. While it's a good move on Prestige's part, and shareholders are clearly excited about what I suspect will be an increase in bottom-line profit, investors should keep in mind that prior to this deal Prestige Brands' organic growth was nonexistent. Until we have confidence that Prestige can grow organically following this purchase, I'd suggest sticking to the sidelines.
Coming in a close second to Prestige was for-profit educator DeVry (DV 2.34%), which vaulted 14% higher after handily topping Wall Street's estimates with its third-quarter report. For the quarter, DeVry delivered a 1.5% decrease in revenue to $496.1 million and a slight dip in EPS to $0.86, from $0.88 in the year-ago period. This was more than good enough to top expectations for $493.5 million in revenue and $0.75 in EPS. DeVry shareholders can thank a boost in enrollment in Brazil for the fairly sizable beat. However, I would caution that domestic enrollment was still down, and it's possible that tough for-profit education regulations and competition in the U.S. will weigh on DeVry moving forward. As such, I'd suggest taking your gains and heading for the exits following today's pop.
Lastly, Weatherford International (NYSE: WFT), an equipment and service contractor to the oil and gas industry, advanced by 11.1% following its first-quarter results. Weatherford reported a 4% decline in revenue to $3.6 billion and an adjusted profit of $0.13 per share. Comparably speaking, EPS topped expectations by $0.02 while revenue fell $110 million short of projections. More important, the company boosted its full-year EPS forecast to a range of $1.10-$1.20, which is notably higher than the current consensus estimate for $1 in 2014 EPS. I don't find Weatherford to be particularly cheap given the current headwinds facing drilling service contractors, but it's tough to argue against its guidance.
