Q3 Earnings Winners and Losers: 3 Stock Duds and 4 Studs

Stock Market

The third-quarter earnings parade continues. According to data compiled by FactSet, 73% of S&P 500 listed companies have reported better-than-expected earnings, and 66% have announced better revenue than had been anticipated among professional analysts. Overall, that’s a pretty good track record. However, there have been plenty of hits and misses among some notable names this earnings period. While some companies have knocked the cover off the ball, others have struck out badly, sending their share prices plummeting as a result. With markets continuing to trend lower and on track to record a loss for the month of October, investors don’t appear to be in a forgiving mood. Companies that have missed expectations for Q3 are seeing their stocks punished. Here are Q3 earnings winners and losers to rethink — three stock duds and four studs.

Q3 Earnings Dud: Canada Goose (GOOS)

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It’s a bad time to be selling winter parkas with the world warming at an alarming rate and wildfires raging across much of the planet. That partly explains why Canada Goose (NYSE:GOOS) laid an egg with its most recent financial results, pushing the company’s share price down to an all-time low. Canada Goose reported a net loss of $85 million for its fiscal 2024 first quarter. Revenue in the quarter rose 21% from a year earlier to $84.8 million, which was ahead of analysts’ estimates. However, the forward guidance provided by Canada Goose was a disaster.

The luxury parka maker forecast fiscal second-quarter revenue of $270 million to $290 million, below analyst estimates of $298.5 million. The company added that it foresees a net loss per share of between 17 and 24 cents compared with forecasts for a profit of 6 cents in fiscal Q2. Sales of luxury goods in the U.S. and elsewhere have been slowing in recent months due to high inflation and rising interest rates. Analysts were quick to downgrade GOOS stock. Both Wells Fargo (NYSE:WFC) and TD Cowen dropped the stock to a Hold, citing a weak economic outlook in both the U.S. and China.

GOOS stock is now down 36% on the year and trading at a 52-week low, which is also an all-time low.

Ford Motor (F)

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Shares of Ford Motor (NYSE:F) dropped 10% immediately after the Detroit automaker issued a disappointing Q3 print and pulled its forward guidance. To be fair, the bad numbers and guidance pull were due almost entirely to the six-week labor strike the company endured at the hands of the United Auto Workers (UAW) union. That said, the cost of the strike and its long-term negative impacts are only now emerging, and it’s not looking good. Ford said the strike cost it $1.3 billion in lost production and said it plans to delay $12 billion in previously announced electric vehicle investments, including postponing construction of an electric vehicle battery plant in Kentucky, due to the labor disruption.

For Q3, Ford reported earnings per share (EPS) of 39 cents compared to 45 cents expected on Wall Street. Revenue in the quarter totaled $41.18 billion versus $41.22 billion expected. Citing the strike, Ford pulled its forward guidance for the remainder of this year. If there’s a silver lining, it’s that Ford’s miserable Q3 print arrived a day after the Detroit automaker reached a tentative deal with the UAW, bringing the strike to an end. Analysts at Deutsche Bank (NYSE:DB) calculated the new labor deal, which runs over four and a half years, will cost Ford $6.2 billion. The new collective agreement provides 25% pay increases. F stock is down 15% on the year and also at a 52-week low.

Q3 Earnings Dud: Tesla (TSLA)

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Tesla’s (NASDAQ:TSLA) stock has fallen nearly 20% since the electric vehicle maker issued an underwhelming Q3 print in mid-October. The company, led by CEO Elon Musk, missed Wall Street’s forecasts in nearly every category and provided weak forward guidance. Tesla reported Q3 EPS of 66 cents and revenue of $23.4 billion. Analysts who track the company’s progress had expected a profit of 73 cents and sales of $24.1 billion for the July through September period. Tesla’s EPS was down 37% from a year earlier, and its gross profit margin was 16.3%, below the 17.2% forecast on Wall Street.

Tesla executives said the company’s price cuts this year are likely to continue as it tries to boost slumping sales. The company has slash prices aggressively this year to help drive sales volumes amid rising interest rates and growing competition from other automakers. The average price of a Tesla vehicle is now $10,000 less than it was a year ago, according to the company. Musk also dampened expectations for the upcoming release of Tesla’s Cybertruck, saying it will likely take a year or longer before the electric pick-up truck is a significant profit contributor.

TSLA stock is now trading 9% lower than where it was a year ago.

Q3 Earnings Studs: Deckers Outdoor (DECK)

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Talk about an earnings bounce. The stock of Deckers Outdoor (NYSE:DECK) rose nearly 20% immediately after the company announced its financial results. The big move comes after the maker of Ugg boots and Hoka running shoes reported record sales and profits for the company’s second fiscal quarter of 2024. Specifically, Deckers reported EPS of $6.82, well ahead of the $4.43 forecast on Wall Street. Revenue in the quarter increased 24.7% year-over-year to $1.09 billion, topping the consensus estimate of $960.62 million among analysts. Both the earnings and revenue were records.

Executives at Deckers Outdoor attributed the stellar results to continued demand for its Ugg boots and Hoka sneakers. The company also reported that its direct-to-consumer sales rose 38.8% to $331.7 million, while its wholesale sales grew 19.4% to $760.2 million during the quarter. Looking ahead, Deckers said it now expects EPS of $22.90 to $23.25, and revenue of $4.025 billion for its entire fiscal year. Both estimates are ahead of Wall Street forecasts. DECK stock has gained nearly 50% on the year and is trading near a 52-week high.

Chipotle Mexican Grill (CMG)

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Chipotle Mexican Grill’s (NYSE:CMG) third-quarter financial results topped Wall Street expectations as the quick service restaurant chain raised prices charged for its burritos and other menu items. The company reported EPS of $11.36 compared to $10.55 — the consensus expectation among analysts. Revenue in Q3 totaled $2.47 billion, which was in line with forecasts. Chipotle’s prices were 2.8% higher in Q3 than a year ago due to price hikes implemented in autumn 2022. Earlier this October, Chipotle raised its menu prices for the first time in more than a year, citing rising food inflation as the reason.

During their Q3 earnings call with analysts and media, Chipotle executives said the company has pricing power, or the ability to raise prices without alienating customers. Chipotle’s Q3 same-store sales rose 5%, beating estimates of 4.6%. The company credited higher transactions and menu prices for the same-store sales growth. Also during the July through September period, Chipotle opened 62 new restaurant locations, 54 of which have a drive-thru lane reserved for picking up digital orders. The company plans to open 285 to 315 new restaurants in 2024.

CMG stock gained 5% after the Q3 print and is up 38% year-to-date.

Amazon (AMZN)

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E-commerce giant Amazon (NASDAQ:AMZN) reported its best quarterly results since the pandemic, beating Wall Street forecasts across the board following a year of cost cutting measures. For Q3, Amazon announced EPS of 94 cents, which trounced the 58 cents expected among Wall Street analysts. Revenue in Q3 came in at $143.1 billion compared to $141.4 billion that was anticipated. Cloud-computing unit Amazon Web Services (AWS) posted sales of $23.1 billion versus the $23.2 billion forecasted. Advertising revenue totaled $12.1 billion compared to the anticipated $11.6 billion.

Amazon added that its core e-commerce business saw sales growth of 7% year-over-year in Q3 after expanding 4% in this year’s second quarter. The Q3 numbers include the results from Amazon’s July Prime Day, which the company called its “biggest ever” sales event. Additionally, digital advertising revenue increased 26% in Q3 from a year earlier, and AWS saw growth in the quarter of 12%. Amazon’s cost cutting measures earlier in the year helped boost its profit margins, with the company reporting a Q3 operating margin of 7.8%, the highest level in two years.

AMZN stock jumped 7% higher after the Q3 print, bringing its year-to-date gains to 49%.

Netflix (NFLX)

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Netflix (NASDAQ:NFLX) stock is up 16% since the company reported strong Q3 financial results that crushed analysts’ forecasts. The streaming giant is back in investors’ good graces after reporting EPS of $3.73, which was ahead of the consensus estimate among analysts of $3.49. Revenue for the three months ended Sept. 30 totaled $8.54 billion, which matched forecasts. However, the figure that really moved NFLX stock was a much better-than-expected increase in paid subscriptions. The company added 8.8 million net new subscribers in Q3.

Netflix also issued strong guidance, forecasting revenue of $8.70 billion for the fourth quarter compared with the consensus Wall Street view of $8.78 billion. The strong results were all the more impressive given that they arrived during an ongoing strike by Hollywood actors that has shutdown film and television production worldwide. Netflix said the positive quarter was due in large part to increased subscription fees and improving profitability. The company now expects a profit margin of 20% for all of this year, which is at the high end of its previous guidance of 18% to 20%. NFLX stock is up 35% year-to-date.

On the date of publication, Joel Baglole held a long position in DECK. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.

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