Why Ulta Salon, Splunk, and Aceto Slumped Today

By Markets Fool.com


Image source: Ulta Salon.

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Friday was a poor day for the stock market, closing what turned out to be the worst week for major market benchmarks since mid-June.

Comments from various members of the Federal Reserve, including chair Janet Yellen, pointed toward a greater likelihood of higher interest rates in the near future than most investors were expecting. That won't necessarily stop the Fed from pursuing its traditionally dovish policy of hesitating before moving rates upward, but it did at least raise a possibility that most investors had discounted almost entirely: A rate hike could come as early as September.

The Dow and S&P 500 finished down modestly, but several stocks performed much worse. Among them were Ulta Salon (NASDAQ: ULTA), Splunk (NASDAQ: SPLK), and Aceto (NASDAQ: ACET).

Ulta Salon isn't as pretty as investors want it to be

Ulta Salon fell 6% despite having what many would have thought to be another strong quarter. The beauty specialist said that net sales jumped 22% to nearly $1.07 billion, with an impressive 14.4% rise in comparable sales featuring retail comps growth of 12.6%. The company also raised its guidance for the full fiscal 2016 year, including comps expectations of 11% to 13%, and earnings growth in percentage terms expected to be in the low- to mid-twenties.

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Yet even with its impressive performance, Ulta Salon didn't manage to satisfy investors' expectations for even stronger growth. Some concerns about rising overhead costs might have given shareholders pause, but more likely is that investors merely took the opportunity to take profits on what has recently been an extremely high-performing stock.

Splunk takes a hit

Splunk dropped 10% after reporting its second-quarter financial results Thursday afternoon. Even though the company managed to boost sales by 43% during the quarter and topped expectations for earnings, the company's guidance for the third quarter wasn't quite as strong as investors had hoped.

Analysts at Stifel raised concerns about Splunk, noting that even though growth from cloud-computing initiatives has been strong, it has also put pressure on the speed at which the overall business is growing its licensing revenue and its billings. In the long run, the emphasis on the cloud might well rule the day for Splunk, but right now investors are having to readjust to the short-term consequences of Splunk's strategic moves in the direction of the cloud.

Aceto reacts badly despite dividend increase

Finally, Aceto plunged 22%. The company reported its fiscal fourth-quarter results on Thursday afternoon, and the maker of performance chemicals and various pharmaceutical ingredients and wellness products said that sales fell nearly 8% during the quarter. Aceto's net income got cut in half, and even on an adjusted basis, substantial declines reflected rising competition in its pharmaceutical business.

Although CEO Sal Guccione said that he expects a return to healthier growth in 2017, investors didn't seem entirely convinced, and the CEO's warning that the first half of the new fiscal year would likely be weaker than the second didn't inspire confidence either. Despite some encouraging signs, including an 8% dividend increase to $0.065 per share on a quarterly basis, Aceto's stock will have trouble making substantial gains until the overall industry environment becomes more favorable.

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Dan Caplinger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Splunk and Ulta Salon, Cosmetics and Fragrance. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.