The stock market was mixed Thursday afternoon, with the tech-heavy Nasdaq leaving the Dow in the dust. Earnings reports ran the gamut from very positive to very negative, and there was no significant macroeconomic news for investors to chew on.
|Index||Change at 1:20 p.m. EDT|
|Dow Jones Industrial Average (DJINDICES: ^DJI)||(0.29%)|
|S&P 500 (SNPINDEX: ^GSPC)||0.01%|
|Nasdaq Composite (NASDAQINDEX: ^IXIC)||0.57%|
On the very bad side of the earnings spectrum was social media company Twitter (NYSE: TWTR), where execution issues led to some rough third-quarter results. 3M (NYSE: MMM) didn't fare quite as badly, but a guidance cut was enough to send the Dow component lower.
Ad problems plague Twitter
Twitter managed to grow its user base in the third quarter, boosting its monetizable daily active user count by 17% year over year to 145 million. But problems with certain ad products and elevated seasonality led revenue and earnings to miss analyst estimates. The stock was down 19.8% at 1:20 p.m. EDT Thursday.
Twitter produced $824 million of revenue in the third quarter, up 9% year over year. That was well short of analyst estimates, missing by more than $50 million. One problem was the discovery of bugs that required the company to take steps that negatively impacted its ability to target ads and share data with partners. Twitter estimates these bugs reduced its revenue growth rate by at least 3 percentage points.
Adjusted earnings per share slumped 19% to $0.17, missing analyst estimates by $0.03. Higher operating costs, driven partly by a 21% increase in employee headcount, hurt the bottom line.
Twitter expects some of the challenges it faced in the third quarter to spill into the fourth quarter. The company sees fourth-quarter revenue between $940 million an $1.01 billion, below analyst expectations of $1.06 billion. At the midpoint, that guidance range represents year-over-year growth of just 7.3%.
While Twitter is successfully driving user growth, it didn't translate into the kind of revenue growth investors were expecting in the third quarter.
3M derailed in international markets
3M, the maker of Scotch tape and a vast array of other products, was forced to cut its full-year guidance on Thursday as sales outside of the Americas slumped hard in the third quarter. The company reported a 2% decline in third-quarter revenue to $7.99 billion, missing analyst estimates by more than $200 million. The stock was down 4.7% at 1:20 p.m. EDT.
3M reported U.S. sales growth of 0.8% and 0.6% growth in Latin America and Canada. But things got dicey outside of the Americas. Revenue in Europe, the Middle East, and Africa plunged 4.1%, and revenue in the Asia Pacific region was down 5%. The impact of currency translation reduced total revenue by 1.3% year over year.
While 3M had previously expected its full-year organic local-currency sales to be down 1% to up 2%, the company now sees a decline between 1% and 1.5%. Adjusted earnings per share is now expected between $8.99 and $9.09, down from a previous range of $9.25 to $9.75.
While there were pockets of strength in 3M's third-quarter report, the company is definitely feeling the impact of a tough macroeconomic environment.
10 stocks we like better than 3M
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and 3M wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of June 1, 2019