Earnings season rolls on, and Thursday it was hammer time for Fitbit Inc. (FIT) . The company released better-than expected results for the second quarter and promptly got whacked.
Fitbit shares fell more than 21% to an all-time low as the company cut forward guidance. Fitbit's loss for the quarter of 14 cents a share was better than the 18-cent consensus, while revenue of $313.6 million was $2 million ahead of estimates, but these numbers were all but irrelevant.
The thing that sunk the shares, in addition to cumulative and growing impatience about whether Fitbit can deliver a positive bottom line, was lowered expectations for the full year. Sales of the company's Versa Lite Smartwatch, which was rolled out in March, have been disappointing to say the least. FIT now expects that full-year 2019 revenue will be in the range of $1.43 billion to $1.48 billion, down from previous estimates of $1.52 billion to $1.58 billion. In addition, gross margins are expected to be in the 35% range, down from the previous 40% Fitbit expected. In reaction, Fitbit said it will cut operating expenses by $20 million to $50 million.
Fitbit ended the quarter with $565 million, or about $2.20 per share, in cash and short-term investments. With shares closing at $3.31 on Thursday, that shows just how negative the markets are about the name. Granted, companies that are losing money will burn through cash, but in this case, it appears that the cash burn for FIT in 2019 has been front-loaded into the first half of the year as the company expects to end the year with between $570 million and $600 million in cash and short-term investments. With an enterprise value of less than $300 million it is time for this company to be sold; it simply should not be public.
Here on Friday morning, Newell Brands Inc. (NWL) reported second-quarter earnings of 45 cents per share, beating consensus estimates by nine cents, on revenue that was in line with expectations. Newell made further progress on the debt front, reducing it by $517 million since the end of last quarter, while cash grew by about $260 million. Newell ended the quarter with $625 million in cash and $6.75 billion in debt; while it still has work to do here, Newell is making progress. Debt was at $10.5 billion one year ago.
Full-year earnings per share are still expected to be in the range of $1.50 to $1.65, putting the forward price-to-earnings (P/E) ratio in the 8 to 9 range, while shares currently yield 6.9%. There's no doubt that Newell has been a reclamation project and its stock performance has been disappointing, but this appears to have been a decent quarter. While still in business divestiture mode, the company announced it will not be selling its Rubbermaid Commercial Products business (it had been included in discontinued operations and classified on the balance sheet as "held for sale"), believing it will be accretive to earnings beginning in 2020.
