The broader market edged even higher into record territory on Friday, buoyed in part by strong earnings releases in the tech sector and better-than-expected U.S. GDP growth.
Despite the overall positive mood on Wall Street, disappointing second-quarter earnings reports dragged down shares of Mohawk Industries (NYSE: MHK), Cabot Oil & Gas (NYSE: COG), and Fortive (NYSE: FTV).
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Mohawk facing a "challenging" flooring market
Shares of Mohawk plunged nearly 18% following the flooring specialist's second-quarter earnings release, which included cautious commentary from management. Revenue came in at $2.6 billion, relatively unchanged from a year ago. That led to adjusted net income of $210 million, or $2.89 per share. Analysts were modeling for $2.7 billion in sales and $2.87 per share in adjusted profit. Though the company beat bottom-line expectations, CEO Jeffrey Lorberbaum's warnings about the flooring market rattled shareholders. "The general conditions in our flooring markets around the world have become more challenging, and competition is more intense," Lorberbaum said. "We are taking actions to improve our sales, reduce our costs, manage our inventory and adjust our offerings." Mohawk expects adjusted earnings per share to be $2.58 to $2.68 in the third quarter.
Cabot cuts production forecast
Cabot Oil & Gas beat earnings expectations, but rising costs and declining production sent the stock 12% lower. Operating revenue in the second quarter came in at $534.1 million, which led to adjusted net income of $150.6 million, or $0.36 per share. Analysts were calling for $0.34 per share in adjusted profit. Cabot generated $72.7 million in free cash flow during the quarter and posted a return on capital employed of 23.5% on a trailing-12-month basis. The company increased its capital budget forecast for 2019 to a range of $800 million to $820 million, up modestly from its previous guidance of $800 million. At the same time, Cabot reduced the outlook for production growth this year, now expecting it to be 16% to 18%, down from a previous estimate of 20% growth. Cabot attributed the revision to "a change in the operating plan resulting from a unique opportunity to acquire acreage adjacent to an eight-well pad."
Fortive reduces 2019 profit outlook
Shares of Fortive fell 4% after the industrial services specialist cut its full-year guidance. Revenue in the second quarter rose 16% to $1.9 billion, translating into adjusted earnings per share from continuing operations of $0.90. That bottom-line result beat analyst expectations of $0.89 per share in adjusted profit. "We achieved the high end of our guidance despite slowing in our short-cycle businesses which became more pronounced as we progressed through the quarter," CEO James Lico said in a statement. "In the face of these emerging headwinds, our more resilient portfolio and the strength of the Fortive Business System helped to deliver another quarter of strong earnings growth and free cash flow." The company reduced its 2019 earnings outlook, and now expects adjusted earnings per share of $3.45 to $3.60, down from a prior forecast of $3.55 to $3.65. The slowdown in short-cycle businesses will "impact demand through the second half of the year," Lico added on the conference call.
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