Tuesday began on a quiet note for the stock market, with major market benchmarks inching higher in the first hour of trading. Many investors are still in wait-and-see mode with the Federal Reserve's monetary policy decision-makers meeting today and Wednesday, but earnings season has continued to have a major impact on market sentiment. Despite a lack of overall volatility in the broader market, some stocks fell sharply, and Sarepta Therapeutics (NASDAQ:SRPT), Allegheny Technologies (NYSE:ATI), and Capital Product Partners (NASDAQ:CPLP) were among the worst performers in early trading.
Sarepta Therapeutics plunged more than 35% in the first hour of trading after an FDA advisory panel voted late yesterday not to recommend approval of the company's eteplirsen treatment for muscular dystrophy. As Sarepta described it in a press release, the FDA panel voted against the proposition that there was substantial evidence from adequate and well-controlled studies that show production of dystrophin in clinically beneficial levels, and it also rejected a finding of effectiveness for the treatment of Duchenne muscular dystrophy. Several analysts downgraded the stock after the findings were announced, and Sarepta's hopes now hinge on whether the full FDA will decide to approve the drug at its anticipated meeting in late May despite the advisory panel's votes. If not, then Sarepta will likely have to conduct more studies in hopes of gaining approval further along in the clinical process.
Allegheny Technologies fell 6% after the company released its first-quarter earnings. The specialty materials company said that sales climbed 3% from year-ago levels, with rising sales of its high-performance materials and components segment offsetting a decline in sales of flat-rolled products. However, the company wasn't able to turn those sales into profits, and even after adjusting for certain restructuring and other one-time costs, Allegheny posted adjusted losses of $63 million, or $0.58 per share. Although Allegheny is benefiting from particular strength in the aerospace industry because of its contribution toward production of commercial aircraft and jet engines, the company is still seeing what it called "a period of continuing low raw material prices and uncertain end market demand" for its rolled products business. Until these commodity markets start to recover, Allegheny could remain under pressure.
Finally, Capital Product Partners dropped 28%. The shipping-company limited partnership slashed its distribution by more than two-thirds in the wake of its first-quarter financial results, which included roughly flat net income from year-ago levels. Capital Product Partners said that it had created a capital reserve in order to address increases in the cost of its obtaining capital, and the decline in the price of its common units necessitated the decision to conserve capital by restraining distributions to investors. In addition, with one of its major customers having to restructure its operations, Capital Product Partners is going through considerable uncertainty. By cutting the distribution, the company will be able to deal with debt coming due and improve its balance sheet, but it's bad news for unitholders who grew accustomed to impressive distribution yields.