Why Pearson, Cameco, and Mallinckrodt Slumped Today
Wednesday was a lackluster day for the stock market, with major market benchmarks finishing the trading session mixed. The S&P 500 and Nasdaq Composite rose slightly, but the Dow Jones Industrials lost ground as the positive influence of gains in the financial sector was offset by falling energy prices. Yet as investors waited for clearer signs of what the incoming Trump administration will do to improve business conditions for the nation, some individual companies took hits from adverse news events. Pearson (NYSE: PSO), Cameco (NYSE: CCJ), and Mallinckrodt (NYSE: MNK) were among the worst performers on the day. Below, we'll look more closely at these stocks to tell you why they did so poorly.
Image source: Pearson.
Pearson deals with publishing woes
Pearson plunged 29% after the publishing company said it would have to cut its dividend amid downbeat guidance for 2017. The educational book specialist said that its initial projections about its U.S. educational business had been too high, and students are balking at paying top-dollar for textbooks when more affordable alternatives to outright purchases are available. The result has been a glut of unsold books, which hit Pearson's revenue for the segment by 30% in the fourth quarter. Yet Pearson also said it would sell its interest in Penguin Random House, boosting exposure to the educational publishing arena. Moreover, with projected earnings coming in between 8% and 16% below what investors had expected, Pearson signaled that a dividend cut would be coming in 2017, and that could further weigh on shares going forward.
Cameco cuts jobs
Uranium producer Cameco dropped 18% in the wake of its release of preliminary 2016 results and its 2017 outlook. Cameco said that it would cut 120 employees by May at its McArthur River, Key Lake, and Cigar Lake operations, representing about 10% of the uranium operations staff. Other cost-cutting measures should help improve bottom-line results, but CEO Tim Gitzel said that "we expect our adjusted net earnings for 2016 will be significantly lower than analysts' earnings estimates." With the company anticipating ongoing weak conditions in the uranium market, Cameco intends to "defend and preserve our core uranium business," in Gitzel's words. Until demand for uranium picks up, Cameco will have to work hard to avoid feeling the impact of rock-bottom spot prices for the radioactive element going forward.
Mallinckrodt settles FTC claims
Finally, Mallinckrodt ended the day down 6%. The pharmaceutical manufacturer and distributor had faced allegations from the Federal Trade Commission that it had violated antitrust laws in setting prices for drugs, and Mallinckrodt said today that it had settled those claims with the FTC in a deal that will involve a $100 million fine. In addition, Mallinckrodt will have to license a key drug to a competitor to eliminate monopoly concerns going forward. The stock had been down much more sharply on fears of a possible FTC criminal prosecution, but most investors appear comfortable that the deal as announced will avoid further problems.
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