Why Polaris Industries, Mallinckrodt, and MetLife Slumped Today

MarketsMotley Fool

Wall Street went through another tough session on Tuesday, extending its losses from Monday. Major benchmarks fell sharply, with declines ranging from 0.9% to more than 1.25%. The Dow Jones Industrials had at one point during the day dropped more than 400 points. Still, the consequence of the Dow's staggering recent run is that even scary-sounding losses in point terms amount to just a 2% drop from its record levels. Nevertheless, some stocks saw worse performance, including Polaris Industries (NYSE: PII), Mallinckrodt (NYSE: MNK), and MetLife (NYSE: MET). Read on to find out why they did so poorly.

Polaris hits the skids

Continue Reading Below

Shares of Polaris Industries fell 13% after the maker of off-road vehicles and other specialty motorsports equipment reported fourth-quarter financial results that failed to inspire investors. Sales for the quarter were up an impressive 18% from year-earlier levels, and although extraordinary items related to tax reform and other issues hurt the company's bottom line, adjusted net income that took those factors into account was up more than 25%. Yet concerns about the health of the motorcycle market in the U.S. weighed on shareholder sentiment, and guidance wasn't strong enough to assure Polaris investors that its worst times are behind it.

Mallinckrodt deals with headwinds

Mallinckrodt stock dropped nearly 10% on a couple of negative news items related to the generic-drug maker's business. Bond rating agency Moody's lowered its outlook on the company's international finance subsidiary from under review to negative, affirming its current junk bond status but putting investors on notice that a downgrade could come in the near future. Yet the more likely reason for the move was the announced partnership between three major non-healthcare companies to look for ways to reduce costs and improve healthcare quality. The fear for Mallinckrodt investors is that if generic drug pricing suffers as a result of the venture, its financial difficulties might get worse. Other players in generics also saw losses, but Mallinckrodt is particularly vulnerable to new competitive shocks.

MetLife needs some time

Finally, shares of MetLife declined almost 9%. The insurance giant had to postpone its official release of audited earnings numbers for the fourth quarter after finding a material weakness in its financial accounting that required revisions on its reserves for various pension and annuity liabilities. More troubling was the announcement that the Securities and Exchange Commission is looking into certain pension-related annuity payments that MetLife was allegedly supposed to have made but apparently did not. Given that MetLife has helped a range of corporate clients address their pension obligations, it's vital that the insurer resolve any SEC issues quickly to keep additional problems from arising.

Offer from The Motley Fool: The 10 best stocks to buy nowMotley Fool co-founders Tom and David Gardner have spent more than a decade beating the market. In fact, the newsletter they run, Motley Fool Stock Advisor, has tripled the S&P 500!*

Tom and David just revealed their ten top stock picks for investors to buy right now.

*Stock Advisor returns as of Jan. 2, 2018.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Polaris Industries. The Motley Fool has a disclosure policy.

Continue Reading Below