Coach, ExxonMobil and Under Armour Earnings Reports Drive Stocks

With earnings season in full swing and President Donald Trump enacting controversial policies, investors have a lot to consider.

The technology industry is up in arms about his immigration ban, and after months of promises from the president on how he will help businesses grow, some of his recent moves have given investors pause.

This has caused the major indices to experience their first real pullback this year, and the Dow Jones Industrial Average is once again below the lofty 20,000 mark. On Tuesday, the index closed at 19,864.09, down 107 points or 0.54%, while the S&P 500 was off 2 points or 0.09%.

It is time for investors to consider ways to protect their portfolios.

Let's look at three big movers on Tuesday, that were driven by their earnings reports.

1. Coach (COH)
The fashion designer and retailer reported adjusted earnings for the fiscal second-quarter ended Dec. 31 of 75 cents a share, while un-adjusted earnings came in at 71 cents a share.

Analysts expected earnings of 73 cents a share on about $1.32 billion in revenue, which is what the company posted, up 4% from a year earlier. Coach posted earnings of 61 cents a share a year earlier.

Management said that China and Europe produced growth and the company still sees opportunity in those markets. Revenue growth for this fiscal year is still expected to come in around the low-to-mid single digits, largely due to foreign-currency exchange, while Coach expects double-digit growth in earnings.

After years of amazing growth, the company's brand began to deteriorate because of constant discounting, which led Coach to struggle for years. It appears that management may be turning the ship around as growth returns.

However, investors must remember that the Coach brand isn't what it was 10 years ago and that the company still has a policy of discounting through its outlet stores and big fashion retailers such as Macy's. International growth is coming as the company enters new markets, while domestic growth is stagnant at best.

Coach isn't a long-term buy-and-hold candidate. This stock is among a group of equities poised to tumble this year.

2. ExxonMobil (XOM)
Shares of Dow industrials component ExxonMobil fell more than 1% on Tuesday after the company reported fourth-quarter earnings that missed estimates.

Earnings of 41 cents a share fell from 67 cents a share a year earlier and came in below expectations of 70 cents a share as production fell by 3%. Excluding write-downs, the company posted earnings of 90 cents a share, but the $2 billion impairment charge that came from lowering the value of gas assets largely affected profits.

Overall, earnings fell in all three of ExxonMobil's segments from a year earlier.

Revenue, meanwhile, came in at $61.01 billion, again below the consensus estimate of $62.28 billion.

Management plans to increase capital spending to $22 billion this year, up from $19.3 billion last year. Margins shrank during the quarter, but oil stabilizing above $50 a barrel for most of the quarter helped ExxonMobil.

Investors need to take this report with a grain of salt because the impairment charge was so large and affected results so dramatically.

3. Under Armour (UA)
Another company that had a rough day was Under Armour, with shares down more than 21%, after the company posted fourth-quarter sales growth of less than 20% for the first time in 27 straight quarters. 

Analysts expected revenue of $1.41 billion and earnings of 25 cents a share. Instead, Under Armour reported revenue of $1.31 billion and earnings of 23 cents a share.

A big part of the miss was due to a number of large U.S. sporting goods retailers going bankrupt over the past few quarters.

Furthermore, management thinks that operating income will decline by $100 million this year, again due to the disruptions from the bankruptcies in the U.S., a region that provides Under Armour with 85% of its global revenue.

Under Armour Chief Executive Kevin Plank also told investors that his company needs to concentrate on keeping the brand a premium product.

He doesn't want merchandise being discounted, which is a smart but difficult strategy.

As has been the case with Coach, once customers begin seeing a company as a discounter, it is hard to get them to change that mindset, and it deteriorates the brand's image. The no-discount strategy can work, but it could take time for Under Armour to get back to the 20% growth rates if it sticks to its plan.

Those who own the stock should hold on for a bumpy ride in the coming quarters.


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The author is an independent contributor who at the time of publication owned shares of UA.

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