As is always the case, earnings season is a mixed bag. Companies that surprise on the upside and issue bullish guidance are seeing their share price rise 10% or more in a day. Companies that miss forecasts and offer a downbeat outlook are seeing their stock slide 10% lower or more in a single trading session. While much of the ups and downs are due to instant overreactions on the part of investors, there are some companies whose problems look serious and should be on your list of stocks to sell.
First-quarter earnings growth is coming in better-than-expected as we near the halfway point of the current reporting season. Q1 earnings growth is now at 5.6%, exceeding analyst forecasts of 4.3% growth, according to data from LSEG. With 229 of the companies listed in the benchmark S&P 500 index having reported financial results, 78% have beaten Wall Street estimates. That said, 22% missed expectations and many of those stocks now look like duds. Here is stocks to sell: three earnings disasters to ditch before it’s too late.
Meta Platforms (META)
Meta Platforms (NASDAQ:META) actually had a very good Q1 print. However, the company’s guidance and spending on new artificial intelligence (AI) projects spooked analysts and investors, sending META stock down 10% and wiping $18 billion off CEO Mark Zuckerberg’s net worth. For Q1, Meta reported earnings per share (EPS) of $4.71 versus $4.32 that was expected among analysts. Earnings more than doubled from a year ago. Revenue totaled $36.46 billion compared to $36.16 billion expected. Sales were up 27% from a year earlier.
While the Q1 numbers were strong, the guidance was another matter. Meta said that it expects sales in the current second quarter of $36.5 billion to $39 billion. The midpoint of the projected range, $37.75 billion, would represent 18% annualized growth. Unfortunately, the revenue outlook fell short of the consensus estimate of $38.3 billion among analysts. The selloff in META stock accelerated as Zuckerberg talked about growing investments in AI. Capital expenditures for 2024 are expected to be $40 billion.
With META stock having nearly doubled over the last 12 months, now might be a good time for shareholders to sell.
United Parcel Service (UPS)
United Parcel Service (NYSE:UPS) continues to struggle post-pandemic. The largest shipping and logistics company in the U.S. reported mixed Q1 financial results as demand for shipments of small packages slumped between January and March of this year. UPS reported EPS of $1.43, which topped Wall Street forecasts of $1.30. However, revenue in Q1 amounted to $21.70 billion, below estimates of $21.80 billion. UPS said that cost controls partly offset subdued demand for small package delivery.
The company also reported a 3.2% decline in average daily shipping volumes in its domestic segment and a 5.8% decrease in its international unit. In January, the company announced 12,000 job cuts, a move that will save it $1 billion this year, as demand continues to soften following a shipping boom experienced during the Covid-19 pandemic. UPS is also grappling with a new labor contract with the Teamsters union that has hurt its margins. The company said it is absorbing 46% of the new wage and benefit costs in 2024.
UPS stock is down 18% over the past 12 months, making it a stock to sell after earnings.
Chevron (CVX)
Oil major Chevron’s (NYSE:CVX) Q1 print showed the continued pressures facing companies operating in the energy sector. The leading oil and natural gas producer reported a profit decline due largely to lower margins at its refineries. Specifically, Chevron reported EPS of $2.93 versus $2.87 that was expected among analysts. The oil major’s profit fell 16% from a year ago. Revenue missed the mark, coming in at $48.72 billion compared to $50.66 billion that was forecast on Wall Street.
Chevron attributed the declining profit to lower sales margins at its refineries and lower natural gas prices due to excess global supply. Natural gas prices have declined 37% this year due to a supply glut caused by warm winter weather around the globe. Also, retail margins for gasoline – the difference between the retail and refining prices – has decreased in recent months. Chevron’s refining business in the U.S. saw earnings plummet 50%. Profits in international refining were worse, falling nearly 60%.
CVX stock is down 2% over the last 12 months and trailing the market. Investors who don’t already own shares in the company should hold off for now.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
