Stocks Spiral After Home Sales Disappoint (MDT, TSL, BKC, BKS, ZAGG)
Stocks took it on the chin again today as the latest report on housing was another huge disappointment; despite a more than three year decline in prices, homeowners that need to sell basically can’t find buyers without government help. Investors expected a drop in existing home sales with the expiration of the home-buyer tax credit last spring, but not the -27% drop in July sales that was reported. There also wasn’t any big corporate news to act as a counterweight. Earnings season is winding down and a lot of investors have checked out until after Labor Day.
Stocks closed lower across the board. The Nasdaq market was the weakest performer, shedding 36 points, or -1.7%, to end at 2,124. The Dow Jones Industrial Average lost -134 points to close at 10,040, down -1.3% on the day, while the S&P 500 lost 15 points, or -1.4%, to end at 1,052. Oil declined by $1.47 a barrel to $71.63 while investors bid up gold by $4.90 to $1,231.80 per ounce.
On the economic front, the National Association of Realtors reported that July existing home sales dove by -27.2% from June to an annual rate of 3.83 million — the lowest since the mid-nineties — following the expiration of homebuyer tax credits in April. Analysts were looking for a -12% sequential drop to a rate of 4.7 million.
In earnings news, medical device giant Medtronic (MDT) plunged -10.8% after cutting its fiscal 2011 guidance. The company now expects 2011 EPS in the range of $3.40 to $3.48 and revenue growth of between 2% and 5%, compared to prior expectations of between $3.45 and $3.55 in EPS on revenue growth of between 5% and 8%. In the first quarter ended July 30th, the company earned $830 million, or 76 cents per share, compared to $445 million, or 40 cents per share, in the same period last year. Excluding one-time expenses, Medtronic posted 80 cents in EPS, in-line with the analyst consensus. Revenue slipped by -4% to $3.77 billion. 86 Pros held Medtronic among their top-15 U.S.-listed equity positions at the end of the second quarter.
On the alternative energy front, Trina Solar (TSL) spiked by 5.8% after beating the EPS consensus in the second quarter and offering a strong outlook for U.S. sales growth in the full-year. The company recorded $38.7 million, or 52 cents per American depositary share (ADS), in net income, compared to $18.6 million, or 35 cents per ADS, a year ago. Analysts were looking for 49 cents in EPS, and revenue more than doubled year-over-year to $370.8 million. Trina said the U.S. will likely account for between 13% and 15% of full-year 2010 shipments, up from just 2% in 2009. At the end of Q2, five Pros held Trina shares in their top-15 U.S.-listed equity holdings.
Fast food player Burger King Holdings (BKC) advanced by 1.7% after beating expectations despite a -17% slide in Q4 net income. The company earned $49 million, or 36 cents per share, in the June quarter, compared to $58.9 million, or 43 cents per share, in Q4 2009. The EPS was enough to beat expectations by 2 cents, but the company’s $623 million in Q4 revenue came in under the $635 million consensus. Sales were off by -1% year-over-year, and sales at restaurants open at least a year dropped for the fifth straight quarter to 0.7% globally and 1.5% in the U.S. and Canada.
Bookseller Barnes & Noble (BKS) fell by -2.3% after posting a loss in its fiscal first quarter. The loss totaled -$62.5 million, or -$1.12 per share, compared to a profit of $12.3 million, or 21 cents per share, in the same period last year. After excluding certain items, the adjusted loss per share came to -$1.02, -22 cents behind analyst consensus. Revenue climbed 21% to $1.4 billion. As for the fiscal second quarter, Barnes & Noble expects a loss of between -5 and -25 cents per share. Analysts had been looking for 15 cents in EPS for Q2.
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