Stocks bounced around near breakeven for most of the trading session on Thursday before both the Dow Jones Industrial Average (DJINDICES: ^DJI) and the S&P 500 (SNPINDEX: ^GSPC) indexes closed just slightly higher.
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The popular Financial Select Sector SPDR ETF (NYSEMKT: XLF) remained flat. Meanwhile, as gold prices inched up to a three-month high, the Direxion Daily Gold Miners Bull 3X ETF (NYSEMKT: NUGT) added 0.7%.
Earnings season continued to produce big swings in individual stocks, with Square (NYSE: SQ) and L Brands (NYSE: L) among the biggest movers on Thursday.
Square beats expectations
Shares of Square gained 14% following surprisingly strong fourth-quarter results from the company. The mobile payments specialist posted a 21% revenue spike that was powered by a solid increase in the volume of business transacted through its platform. As a result, revenue for the year climbed to $1.71 billion to edge past management's forecast of between $1.695 billion and $1.7 billion that was issued in early November.
Full-year adjusted earnings also trounced executives' target of between $31 million and $33 million by stopping at $45 million. "We're very proud of our first year as a public company," management explained in a letter to shareholders. "We delivered value for our customers in a way that meaningfully grew the business at scale, increasing both revenue and margins."
Looking ahead, Square is aiming to balance revenue growth with improving profitability. Sales are projected to grow by 30% as net loss is cut from $0.50 per share in 2016 to between $0.24 per share and $0.20 per share. To hit those aggressive targets, the company will need to achieve increased uptake of its subscription- and service-based options, along with continued success releasing new products that resonate with sellers who are on the go.
L Brands lowers its outlook
L Brands, the owner of the Victoria's Secret and Bath & Body Works franchises, slumped by 16% after the retailer announced declining fourth-quarter profits. Earnings slipped by 7% as profitability declined sharply in the Victoria's Secret segment. Comparable-store sales were flat over the key holiday shopping period.
Yet investors were more disappointed by the guidance that management issued for the coming quarters. Rather than decline in the mid-single digits, as executives had forecast before, comps are now expected to slump by as much as 19% when it posts February results. Some of that decline can be pinned on its exit of the Victoria's Secret swim and apparel category, but falling customer traffic is likely to blame for most of the fall.
In an investor presentation, management explained that comps will be down in the "low-single digits" in 2017, which should improve to a slightly positive figure after excluding the swim and apparel exit. Meanwhile, gross profit margin for the first quarter will fall "significantly," the company warned, even as expenses rise. Those two trends will combine to take a serious bite out of earnings. L Brands sees profit for the year coming in at between $3.05 per share and $3.35 per share, down from last year's $3.74 mark .
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