Why RadioShack, McDermott, and Gentiva Health Solutions Tumbled Today
Stock-market investors were almost unanimously in a good mood Tuesday, as signs of a potentially non-combative resolution to the crisis in the Crimea allowed markets in most countries to rebound substantially today. Yet even though the S&P 500 reached a new all-time record high and the Dow climbed more than 225 points on the day, RadioShack , McDermott , and Gentiva Health Solutions were unable to participate in the festive mood on Wall Street and instead posted substantial losses today.
RadioShack (RSH) plunged 17% as the electronics retailer announced plans to close as many as 1,100 stores, representing more than a fifth of its overall store count. Despite efforts to revamp the company's image and focus on more profitable opportunities, RadioShack said that its same-store sales plummeted 20% during its most recent quarter, with large losses again raising concerns among long-term investors about how long the retailer can continue to absorb red ink. Meanwhile, with the store closings reportedly representing a violation of bond covenants on the electronics retailer's debt, RadioShack could have even more problems to deal with in the near future.
McDermott (MDR) dropped 8% after the engineering firm reported poor quarterly results and withdrew its future guidance for the company. Revenue plunged by nearly half, leading to a dramatic loss for the quarter, and even new CEO David Dickson noted that "McDermott is at a strategic inflection point" in arguing that it has resolved many outstanding issues that should allow for further future growth. Yet investors weren't heartened by the company's lack of confidence in choosing to suspend providing financial guidance in the future, and analysts followed up with downgrades of the stock. With participants in the energy industry getting increasingly nervous about the sustainability of its boom times in the future, McDermott is just the latest example of stocks in the area that have been hit hard.
Gentiva (GTIV) fell 10% after the home-health services provider said that it had lost money during the fourth quarter, with the company blaming its corporate restructuring efforts for the losses. With closings and consolidations of dozens of its locations, Gentiva didn't show nearly the success that investors expected from the company, especially given the demographic tailwinds that should be causing the home-health and hospice-care industry to grow dramatically. Yet as health-care reform from the Affordable Care Act and Medicare weigh on profits, Gentiva faces the challenge of navigating changing conditions to find the best way to make money.
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