Why Lorillard, RetailMeNot, and ITT Educational Services Tumbled Today
Stocks rose modestly on Thursday, as the same favorable conditions that lifted the market to big gains on Wednesday persisted. For the most part, as long as economic strength continues in the U.S., investors appear poised to let the recent record run for stocks continue. Nevertheless, even among the general optimism, some stocks posted substantial losses, with Lorillard , RetailMeNot , and ITT Educational Services among the most noteworthy decliners on the day.
Lorillard fell 5% as investors in the cigarette company continue to weigh speculation about the possibility of a merger between it and rival Reynolds American. Conflicting reports about how close the two tobacco giants could be to a possible combination have sent the stock in both directions recently, and analysts now worry about the potential antitrust scrutiny that any merger between the two companies would draw. Even with the decline, though, Lorillard stock gave up only about half of its advance from Wednesday, and many shareholders still believe that the two companies will eventually take further steps toward a combination in the long run.
RetailMeNot plunged 19% as investors worried about the possible impact to the online coupon company of changes to the algorithm that the most popular search engine uses. Many investors fear that if search results that include RetailMeNot's coupon offerings don't highlight RetailMeNot as much as in the past, then it could reduce resulting traffic. In a statement, RetailMeNot admitted that it has seen some shifts in its rankings and resulting traffic from the search engine, but it believes that the impact of the move has been overstated. With efforts to diversify its traffic sources beyond the search-engine universe, RetailMeNot believes that vehicles like its mobile applications and an overall increase in brand awareness should help it drive enough traffic that it won't need to change its financial guidance.
ITT Educational Services plummeted almost 20% after reporting preliminary first-quarter results that failed to give investors confidence about the for-profit educational institution's future. Total enrollment fell 6.4%, with new student enrollment declining by a more modest 3.8%. Of more concern to investors is the fact that ITT Educational Services had to withdraw its internal goals for the full 2014 year, with continuing uncertainty about how ITT accounts for its PEAKS private student loan program forcing the company's hand. With all the bad press that for-profit schools have gotten in recent years, investors have no patience for anything that hints at controversy.
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The article Why Lorillard, RetailMeNot, and ITT Educational Services Tumbled Today originally appeared on Fool.com.Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends RetailMeNot. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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