While You Were Voting
If Corporate America thought investors would be distracted by the election this week, it thought wrong.
The final showdown between Democratic candidate Hillary Clinton and Republican Donald Trump is taking place during earnings season, so much of the news that companies delivered on Monday and Tuesday came via planned press releases and conference calls. But corporations do get to choose which day they want to announce their quarterly results -- and the ones that picked this week seemed to have particularly bad news for investors.
Take CVS Health Corp. Just as voters started hitting the polls on Tuesday morning, the drugstore operator cut its earnings forecast for 2016 and gave what one analyst dubbed a "shocking" view on 2017. The company expects to lose more than 40 million retail prescriptions next year after rival Walgreens Boots Alliance Inc. inked network deals that left CVS out in the cold. CVS shares fell as much as 17 percent, setting the company up for its worst decline since 2009.
And then there's the Valeant Pharmaceuticals International Inc. Much like the election, just when you think things can't possibly get any worse for the drugmaker, they do. Valeant took a $1.05 billion goodwill impairment charge on the value of some U.S. businesses, including Salix, a maker of irritable bowel syndrome treatments that it acquired for $15.8 billion including debt in 2015. And that's considered one of Valeant's OK businesses! Don't even ask about the rest of the company. Valeant cut its profit forecast (again).
Valeant CFO Paul Herendeen seemed to be channeling Trump and the element of suspense, warning investors that “there could still be surprises yet to be discovered.” After everything Valeant investors have gone through, they weren't going to be distracted by the question of whether Trump is going to accept the results of the election -- and they certainly weren't going to give Valeant the benefit of the doubt that there might actually be good surprises for a change. Shares of the drugmaker fell as much as 28 percent.
Moving on to Hertz Global Holdings Inc. The car-rental service took what can only be described as a giant axe to its full-year earnings guidance after reporting third-quarter profit late Monday that was well below what analysts were estimating. Hertz now expects adjusted earnings per share of as much as 88 cents this year, compared with a call just three months ago of as much as $3.50. The dramatic shift was the result of higher depreciation costs after Hertz failed to properly gauge what the cars in its fleet would sell for at auction.
Hertz shares tumbled as much as 52 percent (!) -- headed for the biggest drop on record. Carl Icahn, Hertz's largest shareholder, must be feeling pretty glum today. Although his mind actually could be elsewhere: The activist investor may or may not be in the running to be Secretary of the Treasury should Trump win.
Even foreign companies were getting in on the bad news bonanza. British retailer Marks & Spencer Group Plc announced it would exit 10 foreign countries and eliminate about a tenth of its U.K. store space dedicated to clothing and home wares over the next five years. It was a massive downsizing in the face of years of sales struggles, but it was regarded as both an admission of defeat and too little too late. Shares of Marks & Spencer sunk as much as 6.6 percent.
It wasn't a total disaster of a day for Corporate America. The benchmark S&P 500 Index was up about 0.7 percent as of 1 p.m. in New York. And some companies did succeed in distracting investors from their bad news. Priceline Group Inc. actually rose to a record after announcing late Monday that it would write down a third of what it paid for OpenTable just two years ago. Investors seemed to focus more on the fact that the company's earnings in the third quarter (which includes the busy summer travel season) were better than expected.
But generally speaking, there probably is never a good day to announce really bad news to investors. Happy Election Day.
To contact the author of this story:
Brooke Sutherland in New York at firstname.lastname@example.org
To contact the editor responsible for this story:
Beth Williams at email@example.com