Why AMC Entertainment Holdings, StoneMor Partners, and XPO Logistics Slumped Today
Monday was a quiet start to the week on Wall Street, as major benchmarks eased downward from Friday's close. The S&P 500 and Dow Jones Industrials traded on either side of the unchanged line, flirting with making further advances into record territory. Yet even though a strong economic report from China gave international investors further optimism, gains evaporated in the U.S. as oil prices slipped and investors waited to see how the opening days of the new earnings season would go. Bad news from some companies also had a negative impact on investor sentiment, and AMC Entertainment Holdings (NYSE: AMC), StoneMor Partners (NYSE: STON), and XPO Logistics (NYSE: XPO) 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.
Will the lights go out on AMC?
Shares of AMC Entertainment Holdings dropped 10% in the wake of negative comments over the weekend from journalists covering the movie theater operator. Barron's released a report noting that AMC and its peers in the theater business have missed out on the bull market in 2017, suffering substantial losses because of rising competition from at-home entertainment options and a lack of original, inspired content from Hollywood. Particularly disturbing is the idea that movie studios might choose to bypass theaters entirely, offering pay-per-view-like options to allow home viewers to pay ultra-premium prices to watch movies at home within days of their initial release. Given all the capital improvements that AMC and its peers have made to modernize theaters and make them more attractive as destinations, that threat could jeopardize their return on substantial investments, and shareholders seemed uncertain how the theater industry will respond.
StoneMor suffers a technical debt default
StoneMor Partners stock declined 10% after the cemetery and funeral home operator gave investors an update on its efforts to restate its financial results. The company said that it still hasn't finished its accounting review, and because it hasn't been able to file its annual report with the U.S. Securities and Exchange Commission pending completion of the review, StoneMor is now in technical default on its revolving credit agreement. The death-care company also foresees that further default events will occur in mid-August, as it believes it's unlikely to be able to file its first-quarter or second-quarter reports quickly enough to meet required deadlines on that front. StoneMor hopes that it will be able to get extensions of time or other waivers with lenders, but the news was still disquieting to investors, who are already gun-shy about the company following its decision last October to slash its dividend.
XPO falls on preliminary results
Finally, shares of XPO Logistics fell 5%. The transportation and logistics specialist released its preliminary second-quarter results, which included total revenue projections of between $3.755 billion and $3.765 billion and operating income of $183 million to $187 million. XPO sees its organic revenue growth coming in between 7% and 7.9%, and cash flow from operations should be between $205 million and $215 million. In addition, XPO said that it would make a secondary offering of its stock, selling 11 million shares to raise capital for general corporate purposes. The company mentioned the possibility of refinancing or paying down debt as well as making strategic acquisitions as possible uses for the funds. Even with today's declines, favorable trends in e-commerce have helped send XPO stock up about 40% so far in 2017.
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Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends XPO Logistics. The Motley Fool has a disclosure policy.