Cloud Computing Stocks Tumble As Markets Finish Mixed (YUM, COST, STZ, EQIX, EQIX, TGB)
Stocks ended decidedly mixed on the day. The Dow was able to squeak out a small gain despite the poor ADP jobs report, while the Nasdaq sold off, hurt by poor guidance from Equinix (EQIX), which sent other high-flying data center and cloud computing related stocks tumbling. The fact that the jobs market continues to remain weak is a bit of a concern, but with consumer spending showing signs of rebounding, we think it should lead to improvement in the employment picture down the line. The signs still point to a modest, gradual recovery, but in time the pace will eventually pick up.
The major market averages were split on the day, with the Dow up 23 points to 1,160. The S&P inched down -1 point to 1,160, while the Nasdaq tumbled -19 points to 2,381. Oil rose 41 cents to $83.23 a barrel, while gold added another $7.40 to reach $1,347.70 an ounce.
On the economic front, U.S. companies unexpectedly cut -39,000 jobs last month, according to ADP Employer Services, following a revised gain of 10,000 jobs in August. Economists were expecting employers to hire 20,000 workers in September.
In earnings news, shares of Yum! Brands (YUM) edged up 1.2% after the fast food company reported a 7% increase in its Q3 profit due in part to solid growth in China. For the quarter, the parent company of Taco Bell, Pizza Hut, and KFC earned $357 million, or 74 cents per share, compared with $334 million, or 69 cents per share, a year earlier. Adjusted EPS was 73 cents, which matched expectations. Sales grew 3% to $2.86 billion, while same-store sales climbed 6% in China and 1% in the U.S. For FY10, Yum! expects adjusted EPS of $2.48, up from previous guidance of $2.43 and in line with estimates, on growth of 12-14%.
Warehouse club operator Costco Wholesale (COST) reported fiscal Q4 net income of $432 million, or 97 cents per share, up 16% from $374 million, or 85 cents per share, last year. Wall Street was expecting EPS of 95 cents. Revenue grew 8% to $24.1 billion. Same-store sales increased by 6% in the quarter, or 4% excluding the impact of higher gasoline prices and the impact of currencies. September same-store sales rose by 5% overall, or 4% excluding the impact of higher gasoline prices and the impact of currencies. The stock rose 1.2%.
Shares of Constellation Brands (STZ) rose 4.3% despite the liquor company’s Q2 profit falling -8%. For the quarter, profit fell to $91.3 million, or 43 cents a share, from $99.7 million, or 45 cents a share, a year ago. Adjusted EPS came in at 52 cents, topping the 49-cent consensus. Revenue slipped -2% to $863 million. For the year, Constellation reaffirmed that it expects EPS in the range of $1.63-$1.78. Analysts are expecting full-year EPS of $1.72. A total of two Pro investors counted the stock in their top-15 U.S.-listed equity holdings at the start of Q3, while over 80 tickerspy members held the stock in their portfolios.
Equinix saw its shares tumble -33.1% after the data center service provider cut its Q3 and full-year revenue outlooks. For Q3, the company is now guiding for revenue of $328-$330 million, down from its previous target of $335-$338 million and below analyst estimates of $336.8 million. For the full year, Equinix said it now expects revenue of about $1.22 billion compared with the $1.23 billion consensus. It had previously forecast full-year revenue in the range of $1.23-$1.24 billion. A total of 22 Pro investors counted the stock in their top-15 U.S.-listed equity holdings at the start of Q3, while 72 tickerspy members held the stock in their portfolios.
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