Look at Target (TGT), for example.
The retailer is getting beat up this morning, falling about $50 in pre-market. All after earnings missed the mark, with Q1 profits falling short, even as sales came in above expectations. Unfortunately, the company is taking a hit with freight costs, and lower than expected sales of discretionary items, which also hit WMT.
According to Zero Hedge, the company posted:
- Adjusted EPS $2.19 vs. $3.69 y/y, estimate $3.06
- Sales $24.83 billion, +4% y/y, estimate $24.34 billion
- Comparable sales +3.3%, estimate +1.17%
- Operating margin 5.3%, estimate 8.13%
It then lowered its full-year forecast on operating income margins to 6%, instead of its forecast 8%. And, according to CEO Brian Cornell, “We were less profitable than we expected to be, or intend to be over time … it’s clear that many of these cost pressures will persist in the near term. Throughout the quarter, we faced unexpectedly high costs, driven by a number of factors, resulting in profitability that came in well below our expectations, and well below where we expect to operate over time.”
That’s quite a crisis.
However, investors may want to use the crisis as an opportunity. A $50 drop may be overkill.
Trading Tips
Speaking of crises, look at baby formula shortages, for example.
According to Bloomberg, “Long-term economic pressures collided with a sudden supply shock. The long-term issues stem from the pandemic, which disrupted supply chains and shipping of myriad products—including ingredients used in baby formula—and caused labor shortages that are vexing many industries. The supply shock ramped up in February, when Abbott Laboratories initiated a recall of powdered infant formula produced at its Sturgis, Michigan, facility, after receiving reports of bacteria infection in several babies.”
Not only was that bad news for families, it was also bad for the Abbott Laboratories (ABT) stock.
However, a crisis may soon lead to opportunity.
Abbott Laboratories is on the move. All after the company entered into an agreement with the US FDA to resume production at its infant formula plant in Michigan. It had been shut down on suspected links to infant illness. However, the US FDA just confirmed that the initial requirements for a restart have been met, and said there is no conclusive evidence to link Abbott’s formula to those illnesses.
“One authorized, Abbott said it would begin production of EleCare, Alimentum and metabolic formulas first and then begin production of Similac and other formulas,” as noted by StreetInsider.com.
Insider Buying: Sight Sciences Inc. (SGHT)
Keep an eye on beaten down shares of SGHT.
After testing double bottom support, the stock is on the move after earnings, and on news of heavy insider buying. Between May 13 and 17, 2022, Director Steffan Encrantz bought a total of 551,802 shares for just over $4.5 million.
With regards to earnings, SGHT:
- Generated first quarter 2022 total revenue of $14.9 million, an increase of 72% compared to the prior year period
- Increased the number of facilities ordering the OMNI Surgical System from 760 in the fourth quarter of 2021 to 811 in the first quarter of 2022, and the installed base of Tear Care facilities from 562 on December 31, 2021 to 635 on March 31, 2022
- Demonstrated continued excellence in Surgical Glaucoma account retention in the first quarter of 2022 with a developed customer retention rate1 of 99.7%
- Expanded total gross margin to 80% in the first quarter 2022 versus 73% in the prior year period