Updated from 3:44 p.m. EDT
Wall Street came back from the Independence Day holiday with a vengeance Wednesday, as it punished the latest round of companies to warn that their earnings would fall below analysts' expectations.
finished down 14 3/16, or 40%, at 21 5/16 in Wednesday regular trading after hitting a 52-week low of 21 7/16.
closed down 40 1/2, or 53%, at 36 5/8. And
fell 3 7/16, or 10%, at 32 1/2. All three companies warned of earnings shortfalls prior to the market open Wednesday.
Investors were already in no mood for surprises. Late Monday, well after the stock market had closed for the holiday,
warned that its quarterly results would miss analysts' forecasts.
Predictably, shares of Computer Associates also dived Wednesday, trading down 21 5/8, or 42%, at 29 1/2 after hitting a 52-week low of 28 1/2.
"I can certainly understand the reaction," said Jim Mendelson, an analyst for
who covers Computer Associates and BMC Software. "These are big misses.
"These companies have had histories
of earnings disappointments. This isn't the first time they've disappointed." Still, he predicted that the two stocks will bounce back once investors catch their breath from the selloff.
Wednesday's announcements followed several earnings warnings released last week
including, most notably, information technology company
. The company closed down 13/16, or 5%, at 14 1/4 after reaching a 52-week low of 14 1/8.
Announcements of earnings shortfalls are down slightly this quarter among
Standard & Poor's 500
companies compared to the same period last year, according to
First Call/Thomson Financial
First Call/Thomson Financial said 35 companies, or 44%, of the 80 S&P 500 companies that have given previews of their quarterly earnings will fall short of analysts' expectations, while 11% will exceed estimates and 45% will be in line with expectations. In the same quarter last year, 48% of pre-announcements warned of shortfalls, while 34% predicted results in line with expectations and 18% projected earnings above market expectations.
BMC Software, based in Houston, said its first-quarter earnings per share would be 18 cents to 21 cents, 54% to 61% less than the 46-cent Wall Street analyst consensus, according to First Call/Thomson Financial. Revenue for the quarter that ended June 30 will range from $365 million to $375 million.
The company, which is scheduled to release final figures July 25, blamed the earnings disappointment on slack sales in its mainframe business. BMC is a
company and a member of the S&P 500 with fiscal 2000 revenue that exceeded $1.7 billion.
In the cases of BMC and Computer Associates, the two companies both attributed their shortfalls to lower-than-expected sales in their mainframe businesses. Corporate America threw more money at developing e-business strategies than on mainframe computers, said Mendelson, the analyst who covers the two software companies. He said both companies' forecasting models are flawed, since they depend on much of their business closing in the final days of the quarter. Despite this, he has buy ratings for both companies, although he dropped Computer Associates from a strong buy after it issued the earnings warning. His firm has not performed underwriting for either company.
Meanwhile, Entrust Technologies, a seller of e-business software and services that secure online transactions, said its earnings per share for the second quarter, which ended June 30, will be 2 cents a share, a 75% difference from the 8-cent Wall Street consensus, according to First Call/Thomson Financial.
The company attributed the shortfall on delays in closing sales.
"The issue here is simply revenue timing, not lost business," said John Ryan, Entrust Technologies president and chief executive, in a statement. "I remain optimistic about Entrust Technologies' prospects for the remainder of 2000 and beyond."
Entrust, based in Plano, Texas, said revenue for the quarter will be up substantially from the $19.8 million recorded in the second quarter of 1999 and slightly above first-quarter 2000 revenue of $29.1 million.
Also Wednesday, Centura Banks said its second-quarter earnings will range from 71 cents to 74 cents, off 25% to 28% from the 99 cents that Wall Street analysts had expected. Rocky Mount, N.C.-based Centura offers banking, investment and insurance services to clients in North Carolina, South Carolina and Virginia.
One minor technology company, Greenville, S.C.-based
, also fell dramatically after it issued an earnings warning. It finished down 2 3/4, or 24%, at 8 3/4 after saying that its second-quarter earnings will be a loss of between 25 cents and 30 cents a share. Analysts had been expecting a 9-cent-per-share loss.
OneSource Information Services
, an online provider of financial information based in Concord, Mass., announced that its second-quarter earnings will exceed estimates and Wall Street acted accordingly: Its shares finished up 1 1/2, or 20%, at 8 7/8.
The company said it would lose no more than 3 cents a share and might break even. The consensus estimate among Wall Street analysts was for a loss of 16 cents a share.