On Tuesday, though the major market indices all posted gains, with the Dow Jones Industrial Average and Nasdaq Composite hitting intra-day highs shortly after the open, three big stocks fell at least 4% after reporting earnings.

Let's take a look at the three stocks.

1. BP  (BP)  
Shares of BP fell 4.02% after posting fourth-quarter revenue of $52.12 billion, compared with $49.23 billion a year earlier and well below the $54.7 billion analysts had expected. Adjusted earnings came in at 13 cents a share, compared with 6 cents a share a year earlier but short of the 16 cents a share analysts had forecast.

Full-year revenue was $186.61 billion and earnings were 83 cents a share, compared with revenue of $225.98 billion and earnings of $1.93 a share a year earlier. Analysts had expected revenue of $200.63 billion and earnings of $1.01 a share.

The weak performance was blamed on poor results in both BP's downstream and upstream operations. Profit from downstream operations dropped 28%, while production fell 5.5% from a year earlier.

Management said that it needs crude oil prices of $60 a barrel in order to balance its books, and during the fourth quarter, prices traded within a range of $50 to $55 a barrel.

The bad news for BP is that oil prices fell again Tuesday, and data show that last year, oil imports in the U.S. rose 36% from 2015. This is largely due to the fact that smaller oil and gas operations drilling in U.S. shale reserves cut production when the price of oil fell below their break-even points.

Although BP needs higher oil prices, so does everyone else, and if prices climb, more and more small outfits will re-enter the market, which would again put downward pressure on the price of crude. At this point, investors should stay away from BP as it continues to struggle to regain its footing from the tragic Deepwater Horizon disaster, which has cost the company $62.6 billion, $7 billion of that coming this year.

There are better places to invest.

2. General Motors (GM)  
GM beat fourth-quarter estimates, posting revenue of $43.91 billion, above the expected $41.5 billion and a 11% increase from a year earlier. Earnings came in at $1.28 a share, also above the $1.17 a share that analysts expected but a decline of 8% from a year earlier.

Management also confirmed its full-year earnings guidance of $6 a share to $6.50 a share, compared with analysts' consensus estimate of $6.01 a share.

But management thinks that full-year 2017 earnings will be flat, due to uncertainty about the Brexit and the Trump administration. Furthermore, adjusted earnings fell in nearly all GM's divisions, causing concern about margins.

The margin picture could get worse as President Donald Trump has spoken about increased import taxes and has singled out the automobile industry for moving plants to countries with lower labor costs. Investors should keep an eye on the political arena and how policy changes could specifically affect GM's margins.

The stock's decline of 4.82% Tuesday could be the start of a much larger drop.

3. Michael Kors Holdings (KORS)
Shares of the fashion retailer and handbag maker plummeted Tuesday, skidding 10.8%. Earnings for the fiscal third quarter ended Dec. 31 came in at $1.64 a share, above estimates of $1.62 a share and up 3.1% from a year earlier.

Revenue hit $1.35 billion, matching estimates but declining 3.2% from a year earlier. Comparable-store retail sales fell 6.9% during the quarter, while licensing revenue dropped 22.9% and wholesale comps fell 17.8%.

The company's saving grace was an 89.1% increase in sales in its Asia market, while the Americas and Europe had 7.4% and 7% sales declines, respectively.

Michael Kors Holdings made some changes over the past year such as no longer allowing big retailers to discount its products and removing specific lines from certain retailers. The company wants to be seen as a high-end fashion retailer, not one with products that are part of discounts and promotions, which hurt its brand image.

The quarterly results indicate that Michael Kors Holdings is still in the process of getting customers used to the new pricing model, which is a tricky thing to pull off.

If Michael Kors Holdings can get consumers to start paying top dollar for its products it will be a successful business and a stock worth owning, but that could take a while. Investors should consider Michael Kors Holdings a risky investment, but for those who are willing to put up with massive price swings, it may pay off in the long run.


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The author is an independent contributor who at the time of publication did not own shares of any company mentioned.