Why J.C. Penney, China Lodging Group, and Envision Healthcare Slumped Today

MarketsMotley Fool

Wednesday was a down day on Wall Street, with market participants reacting negatively to what many see as an increasing chance of an escalating series of disputes between the U.S. and its trade partners. Giving up early gains, major benchmarks fell as much as 1%, with multinational companies that rely the most on free trade seeing some of the biggest hits. In addition, some bad news from other corners of the market added to the pessimistic mood among investors. J.C. Penney (NYSE: JCP), China Lodging Group (NASDAQ: HTHT), and Envision Healthcare (NYSE: EVHC) were among the worst performers on the day. Here's why they did so poorly.

J.C. Penney keeps falling

Continue Reading Below

J.C. Penney stock dropped another 7%, bringing its losses for the month to nearly 30% as investors continued to respond negatively the department store retailer's weak financial condition. Analysts at Credit Suisse were less than excited about J.C. Penney's prospects, suggesting that the stock price could fall to as low as $2.50 per share due to sluggish revenue and rising costs and discounting activity. As competition gets fiercer, it'll be increasingly difficult for the company to stand out from other retailers. Despite successful efforts to keep creditors happy for now, J.C. Penney needs to make progress improving its fundamental business if it wants to mount a lasting turnaround.

China Lodging can't grow fast enough

Shares of China Lodging Group fell 10% despite the company posting solid financial results in its fourth-quarter report. China Lodging said that revenue was higher by nearly a third, resulting in a more-than-80% jump in net income from year-ago levels. Yet the stock has risen sharply over the past year on hopes that improving conditions not just in China but throughout the Asia-Pacific region could contribute to even faster growth, and so the company's results simply weren't good enough to support the advance. Even with today's decline, China Lodging has doubled from where it traded a year ago, reflecting the optimism that many investors still maintain.

Envision loses a bidder

Finally, Envision Healthcare stock lost 8%. News reports surfaced that the medical services company can no longer expect to receive a buyout bid from health insurance giant UnitedHealth Group, as it has apparently dropped out of the process. Activist investors had put pressure on Envision to seek buyout bids, and most of those following the stock believe that some high-profile names in the private equity world had been interested in possibly making an offer. With UnitedHealth out of the running, the odds of a bidding war are greatly decreased, and the process might even fail to generate a viable bid. With big questions about the company's continuing viability, any problems for Envision Healthcare with the sale process could be even more devastating than they'd otherwise be.

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.

Click here to get access to the full list!

*Stock Advisor returns as of March 5, 2018.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool recommends UNH. The Motley Fool has a disclosure policy.