On Thursday, investors saw an abrupt drop in the stock market, with investors worrying about a couple of different issues that affected overall sentiment. First, the decision by Carl Icahn to exit shares of Apple seemed to raise concerns, not just about the iPhone giant, but also whether companies that are looking to the Chinese market for growth can count on enough economic strength there to deliver anticipated gains in revenue and earnings.
Second, the Bank of Japan's surprise announcement not to take further stimulus measures suggested that the long period of cheap financing worldwide might finally be approaching its end. Broad-market benchmarks were down about 1%, but several stocks fell more sharply, and Beazer Homes (BZH -2.91%), Ocwen Financial (OCN -1.97%), and Piper Jaffray (PIPR -0.95%) performed especially poorly on Thursday.
Beazer Homes fell 15% after reporting a loss in its fiscal second-quarter financial report. Several of the homebuilder's financial metrics appeared positive, including a 32% rise in homebuilding revenue led by strong growth in the West region, and a jump of 23% in the number of home closings it had during the quarter, to 1,150.
Adjusted pre-tax operating earnings rose by nearly a third, but CEO Allan Merrill noted that, "uncertainty in the broader economy contributed to an uneven start to the spring selling season." That showed up in the total number of new-home orders the company had, which amounted to a 9% drop, to 1,538.
Backlogs dropped, and cancellation rates moved higher, but the CEO was "encouraged by more consistent new home orders as the quarter progressed." Investors anticipated a profit for the quarter, so even a $0.04 per-share loss was enough to spook them.
Ocwen Financial plunged 22%. The mortgage-servicing company reported a 35% drop in revenue, and a net loss of $0.90 per share, shocking most of those following the stock. Adverse changes in the fair value of servicing rights due to changing interest rates created a substantial one-time charge, and investors seemed uncertain about Ocwen's ongoing strategy to reduce leverage.
Ocwen hopes that the lending segment, which posted a small pre-tax profit, will be able to drive positive results for the overall company in the future. Yet with the potential for major disruptions in the mortgage market if interest rates begin to climb, Ocwen will have to work hard to overcome its long-term challenges.
Finally, Piper Jaffray fell 16%. The financial firm reported first-quarter results that included a 2% drop in adjusted revenue, and a 44% decline in adjusted net income. Assets under management plunged by more than a third, to $7.5 billion, as of the end of the quarter, and Piper's returns on equity were substantially lower than year-ago levels, as well. As CEO Andrew Duff put it, "The strength in [our Advisory business] was in contrast to the challenging markets confronted by the industry in the first quarter."
Piper is just one of many investment managers and related companies that are having to deal with adverse impacts from the volatile markets so far in 2016; but what's somewhat surprising is that the rebound in the stock market toward the end of the first quarter didn't seem to have as much of an impact as investors would have hoped. Looking forward, Piper will have to work harder to retain existing customers, and attract new capital in order to maximize its success.