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Why Alcoa, 3D Systems, and Sanderson Farms Slumped Today

By Dan Caplinger – Mar 15, 2016 at 6:25PM

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A somewhat sluggish day for the market left these stocks among the big decliners. Find out why.


Image: Alcoa.

Stocks largely stayed in their holding pattern on Tuesday, with the Dow climbing into positive territory even as broader benchmarks posted declines of up to half a percent. A combination of falling oil prices, Presidential election-related nervousness in the U.S., and the beginning of the Federal Reserve's two-day meeting on monetary policy all contributed to an uncertain mood among investors. Many also believed that the market was simply ready for a break after extensive volatility to start 2016. Even though the stock market overall behaved relatively well, some stocks lost considerable ground, including Alcoa (AA), 3D Systems (DDD 5.98%), and Sanderson Farms (SAFM).

Alcoa fell 5% on a generally down day for the materials sector, which responded to falling oil prices and further concerns about the state of the commodities markets worldwide. Alcoa also announced some news related to its impending breakup into two separate pieces, saying that the portion of its business that will focus on value-add products such as aluminum automotive frames and aerospace materials and components will be called Arconic after the spinoff is complete. Meanwhile, the legacy aluminum smelting and refining division will retain the Alcoa name. So far, the company is on track to complete the breakup during the second half of this year, and investors hope that by separating the higher-growth value-add segment from the more commoditized smelting and refining business, they'll realize higher total value than they are currently getting in their shareholdings.

3D Systems dropped 13%, giving back some of its gains from yesterday. The 3-D printing company received analyst downgrades on multiple fronts on Tuesday, and critics expressed concern about the fact that the stock had more than doubled just since mid-January. With the global economy still experiencing low levels of capital expenditures and a reluctance to invest in long-term growth, bearish analysts fear that 3D Systems can't count on the industrial demand that investors have hoped to see in driving its business forward. Until the prospects for 3-D printing become clearer, 3D Systems investors will need to get used to the volatility that the stock has suffered recently.

Finally, Sanderson Farms declined 7%. The meat producer got a downgrade from analysts at Goldman Sachs Tuesday, with the Wall Street firm issuing a sell recommendation on the stock. The analyst firm believes that Sanderson Farms' recent strength is unwarranted and that the risk-reward proposition for the company's shares is imbalanced toward the downside. Even though bullish investors believe that some of the fundamental challenges that Sanderson Farms faced have passed, Goldman believes that weak exports and high domestic supplies of pork, beef, and chicken could all lead to Samuelson continuing to face challenging supply and demand dynamics. Until the overall industry situation changes, Samuelson Farms might not achieve a full recovery as quickly as most investors now hope.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends 3D Systems. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Alcoa Inc. Stock Quote
Alcoa Inc.
AA
3D Systems Corporation Stock Quote
3D Systems Corporation
DDD
$8.69 (5.98%) $0.49
Sanderson Farms, Inc. Stock Quote
Sanderson Farms, Inc.
SAFM

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