The last week of earnings season showed forgotten consumer stocks roaring back as prominent technology names fumbled. However, new disruptors continue to emerge.
The consumer theme stands out the most as companies like Anheuser-Busch InBev (BUD), J.C. Penney (JCP) and Best Buy (BBY) surprised to the upside.
BUD plans to boost profits by pushing drinkers to higher-priced beers. That was welcome news for a company loaded with debt after spending billions to become global beverage empire. Can it follow a similar path as Coty (COTY) — finally enjoying synergies from major consolidation?
JCP, which has an even heavier balance sheet, beat earnings and revenue expectations. Perhaps more important, the same-store sales metric was better than feared as CEO Jill Soltau shuttered weak locations and exited the appliance market. Instead she’s trying to win the apparel and accessory game with quicker delivery of up-to-date merchandise.
Best Buy Pivots to Services
BBY’s turnaround pivoted on services and the popular videogame Fortnite, which boosted console demand. Same-store sales, earnings and revenue all surpassed consensus, allowing management to return more capital to shareholders. Going forward, investors are eyeing new devices like foldable smart phones and health products.
There were more. Packaged-food companies Campbell Soup (CPB) and JM Smucker (SJM) both pushed ahead of consensus on their top and bottom lines. Ditto for Arkansas department store operator Dillard’s (DDS).
But then you had heart-breakers in the technology sector. Booking (BKNG), formerly known as Priceline, cratered after revenue and guidance disappointed. Management blamed Brexit for a slowdown across the pond.
A weak outlook also dragged down Square (SQ), the one-time high-flier run by Jack Dorsey. Investors shrugged off strong backward-looking results and worried about growth in coming quarters.
HP Hammered
Computer maker HP (HPQ) took a beating after desktop and printer sales came up short. Management also said it’s struggling to adapt as customers shun traditional brick-and-mortar distribution outlets.
Speaking of old-school business, Stamps.com (STMP) lost more than half its value after ending a contract with the U.S. Postal Service. Now it needs to reinvent its offerings around other suppliers like FedEx (FDX).
Box (BOX), once viewed as an up-and-comer in the cloud-computing space, missed on earnings, revenue and guidance. The company blamed “longer sales cycles for some seven-figure deals.” In other words, enterprise clients aren’t opening their wallets as quickly as once hoped.
Fitness-device maker Fitbit (FIT) also painted a glass-half-empty view of the future as management cuts prices to win business. That’s the polar opposite of the story over at Garmin (GRMN).
Weight Watchers (WTW) also cratered after cutting its guidance. The injury looks self-inflicted in this case as the Oprah-backed diet company lost customers after changing its name to WW.
Disruptors Emerge
Despite some of the higher-profile technology stocks missing, some newcomers shot upward. Wayfair (W) and Etsy (ETSY) rocketed more than 30 percent each to record highs after beating estimates. Both showed signs of continued market-share gains.
Universal Display (OLED), which uses organic-based chemicals in smart phone screens, surprised to the upside and spoke of “broadening landscape of consumer OLED end products” lifting demand in the future.
Another theme this earnings season has been strength in cybersecurity stocks like Arista Networks (ANET), Fortinet (FTNT) and CyberArk Software (CYBR). Palo Alto Networks (PANW) joined that club with strong top- and bottom-line results. That sent PANW to a new all-time high.
Trade Desk (TTD), a provider of online advertising software, also broke out after profit, revenue and guidance cruised past the Street.
Some other well-known companies, like Home Depot (HD) and Lowe’s (LOW) merely drifted. The home-improvement chains missed estimates but had mitigating circumstances like extreme cold last month.
Macy’s (M) clung to the bottom of its recent range after its own one-offs, including a fire, muddied results. L Brands (LB) also slid on weak guidance as the company’s once unstoppable Victoria’s Secret brand struggles to adapt to a new retail environment.
In conclusion, investors are still finding new growth opportunities as earnings season nears its end. However former rock-stars in the growth sector continue to struggle.
