When is a miss not a miss? When the stock's inexpensive, hated and devoid of love -- that's when.
And if it isn't hammered ahead and there's a lot of love? Then you can expect the miss to eviscerate the stock.
Let's start with the good miss. I've actually got five of them: 3M (MMM) , Pfizer (PFE) , Whirlpool (WHR) AMD (AMD) and, best miss for last, Apple (AAPL) .
This morning at 6:30 on the dot, 3M reported and it was immediately greeted with boos because the company widened the range of what it could earn, widened it by lowering the low end which means the company was more cautious that we thought. It also cut its year forecast from $10.60 to $11.05 to $10.45 to $10.90
In pre-market the stock of this iconic conglomerate immediately fell to from $193 to $187 in a total air pocket. It was a jarring decline, the type that makes you wonder whether, after months in the wilderness, 3M has finally given up the ghost.
But then a funny thing happened. Well, not so funny if you sold it. The stock started walking its way back up as the less hair-trigger traders digested what we call the deck, the big set of slides that tells you how the company really did.
What did people see that turned the stock around to the point that at 7:20 a.m. it was actually up three points, or nine from the bottom?
They looked at the fine print. They looked, specifically at the key health care division that had really disappointed last quarter. Instead of being down, the division actually had sales up 2.4% in U.S. dollars and 4.8% percent in foreign currency. It was an amazing turn for a business line that people thought, out of nowhere was starting to really decline.
Most 3M camp followers believed that 3M would not only show no progress in the quarter after the disappointing numbers from the previous quarter. Expectations were about as low as they get.
So now instead of a stock that you would expect would go down on the shaded forecast you had one that surprised what had become the quiet consensus, the whisper so to speak, that was below those new numbers.
Given that the stock had been at $259 a year ago, buyers simply could not resist and the stock ended up having a very nice day, finishing up $3.73..
Oh one more thing: lots of the weakness that 3M did have emanated from Asia. Can you imagine if we get a trade deal with China? This stock might be ideal for a portfolio with a 2.7% yield and a call on those talks that we are gong to hear a lot of chatter about tomorrow. I think at $196 you aren't getting much China risk.
Pfizer? It reported an in-line quarter but it slashed its guidance from $3.04 to $2.82 -$2.92. Totally brutal. Horrendous even. The stock, which went out at $39.50 immediately shed a dollar and you could tell it was going to be a rough day because that forecast gave you little or no revenue growth.
Yechh.
But then more of a fine print triumph: Pfizer reported some amazing fourth quarter operational growth, 5% and I was blown away by how strong that was. It means that the future will be brighter than the past which is important because the stock had come down from $46 to $39. With a great balance sheet and a 3.5% yield and a strong pipeline Pfizer at $38 in premarket was a steal and it ended up at $40.77 up 3%.
The wildest and most whacky? Whirlpool. The venerable appliance maker beat the forecast, earning $4.75 when the street was looking for $4.23 but it slashed its year estimate from $15.98 to $14-$15.
The street immediately went nuts with analysts falling all over each other to bash the stock and it quickly fell from $124 to $116. IT was hideous and the stock looked like the biggest loser of the day. But upon further review the company ended up telling a compelling story on its conference call that explained why it shaded its forecast and given that it was down 30% the sellers dried up. The stock ended up 20 points from that low, closing at $136, a gain of 12 and the third biggest winner in the S&P 500. The miss was regarded as a hit given how low the stock had fallen.
AMD? After its rival Nvidia (NVDA) blew up people assumed the very worst from AMD. They didn't get it. What they got was a quarter than met estimates and a guidedown that was much less than we got from Nvidia. Lisa Su, who will be on Squawk on the Street tomorrow, delivered a not as good as expected quarter when we were looking for a terrible quarter. There was nothing to eviscerate here because Su didn't give you an Nvidia, more on that one later.
Finally there is Apple and what can I say about this one? First, we learned from Tim Cook the CEO that while the company indeed had to lower guidance earlier, things are looking up for the month of January. That's' a huge surprise given that so many people -including myself-figured that as December goes-and December was awful--so goes the first month of the year.
Now we know that Apple didn't show growth in large part because of China, where business was down 27% as price cuts and weaker sales impacted the number very negatively. The emerging markets were very rough, too.
But the issue for those who hate Apple? NO more new ammunition. For example, lots of people were saying there would be a degradation of Apple's service revenue. That just didn't happen. Not at all. It stayed steady.
Some expected a slowdown in some of the ancillary products like the watch. Nope, still on fire. Others believed that there would be commentary about how some weakness in the ecosystem, the key to more service revenue. No, I heard the opposite. And for those who keep saying Tim Cook says he has some big things in the pipeline. Oh and one more thing cloud revenues were up 40%. WOwza.
The news simply wasn't horrible enough to sate the bears. In fact the stock is trading up after hours above the pre-announcement.
Is it back?
We get a trade deal? You have a $180 stock up $20 from here. There just isn't that much risk given that we got the high sign on January numbers
So here is the bottom line: when you have expectations that are through the floor and you don't' get huge blowups like you did with Nvidia, then you have tinder for a fire.
That's just what we got from these five stocks and if Jay Powell doesn't blow us up tomorrow I think we may be set for a decent finish to this week.
