With little on the economic docket today investors were left to feed on earnings data -- and for a rare change in this season they didn't like what they saw.
According to research firm FactSet, of the 371 S&P 500 (^GSPC 0.54%) companies that had reported through the weekend, 74% beat the mean earning-per-share estimate. However, just 52% topped the mean revenue estimate.
While these results are still better than expected, there has been notable weakness in the technology sector, especially social networking, which had been one of the primary leaders of this recent market rally. Twitter (TWTR), for instance, was walloped today as its six-month lockup expired and 489 million shares become available for sale. Based on the company's 17.8% collapse that erased billions in market value, investors are quite skittish about the potential for slowing near-term growth.
Following Twitter's move lower and a number of other disappointing results, the S&P 500 finished lower by 16.94 points (-0.90%) to close at 1,867.72.
Despite the decisively negative trading, office supply chain Office Depot (ODP 3.27%) surged 15.8% after reporting its first-quarter earnings results.
Source: Office Depot.
For the quarter, the combined entity of Office Depot and OfficeMax produced $4.35 billion in revenue with same-store sales down 4% year over year. Adjusted for one-time costs, profit came in at $0.07 per share. Wall Street had expected just $4.28 billion in sales and $0.03 in profit, so this was a sizable beat. Furthermore, Office Depot also announced that it would close 400 stores over the next two years in order to save $75 million annually, and it boosted its full-year operating income forecast from $140 million to approximately $160 million. While investors are obviously pleased to see that cost reductions are on the way, I'm still not a big fan of rewarding "less bad" results. Office Depot has a long way to go before it's a formidable threat to Staples, and in the U.S. its store attrition is only likely to give Staples improved market share over the coming quarters. I'd suggest you continue to avoid this stock.
Struggling oil and gas exploration and production company Forest Oil (NYSE: FST) gained 13.4% on the day after it announced its first-quarter earnings results and, more importantly, said it had agreed to be acquired by privately held Sabine Oil. For the quarter, Forest reported a bottom-line reversal, delivering a net loss of $21 million compared to a profit of $106 million in the year-ago period. The deal, though, is what has Wall Street abuzz. The combined entity will keep the Sabine Oil name, and when the deal closes it'll trade on the New York Stock Exchange under the ticker "SABO." While no financial terms were released, Forest Oil shareholders will own about 26.5% of the combined entity. With adjusted profits dwindling and $751.7 million in net debt on its book, basically unchanged from the sequential fourth quarter, this buyout appears like a necessary, but nonetheless disappointing, maneuver for Forest Oil.
Source: Scott Pena, Flickr.
Finally, oil and gas exploration and production company Swift Energy (SBOW) jumped 8.7% after updating its full-year operational and financial guidance. Following its announcement last week that it produced 2.94 million barrels of oil equivalent for the quarter -- a 4% increase in production over the prior year that nonetheless led to a decrease in year-over-year profit -- Swift Energy today announced that it anticipates a $150 million cash consideration payment upon the closing of a joint venture with Saka Energi Indonesia, expected by the end of this quarter. Swift announced its intention to use these funds for general corporate purposes and to reduce its credit facility by $34.2 million. In turn, the company boosted its capital expenditures forecast to a new range of $350 million-$400 million from a previous projection of $300 million-$350 million, while also boosting the low end of its production forecast to 11.5 million barrels of oil equivalent from 11.3 MMBoE. While I'm pleased to see this update, I'd also remind investors that Swift is merely teetering around the profitability line, and it might be prudent to wait until it's healthfully profitable before venturing into the water.
