Why Are These Four Stocks Among Wednesday’s Biggest Losers?

The U.S markets opened in the green this morning, with the Dow Jones Industrial Average up by 0.16% to 17,946.28 and the S&P 500 up by 0.14% to 2,112.93. While the markets opened on a positive note, some companies were not following the trend, with each dropping heavily at the start of trading in the heat of hiccups in their recently released financial results. We’ll take a look at those results below, as well as the study the sentiment that elite hedge funds have for each company.

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Healthcare solutions provider Cerner Corporation (NASDAQ:CERN) experienced a 7.01% drop after the opening bell to $61.28 per share, a day after announcing lower-than-expected fourth quarter guidance on the backdrop of a strong third quarter 2015 financial report. The Missouri-based company reported adjusted net earnings of $188.7 million, or $0.42 per share in the third quarter of 2015, swinging from the $145.3 million, or $0.37 per share which it reported earning in the same quarter in 2014.

However, it disclosed a 2016 adjusted diluted earnings per share projection in the range of $2.30-to-$2.40 per share, before share-based compensation and acquisition-related adjustments. Although the EPS expectation reflects a 13% upside from the 2015 expected outcome, the range is below the current consensus estimate of $2.52 per share. During the company’s earnings conference call on Nov. 3, after the closing bell, Cerner Corporation (NASDAQ:CERN) CFO Marc Naughton said the revenue for the third quarter of 2015 was $1.13 billion, up by 34% from the same quarter in 2014, but that total revenue was about $20 million below the low-end of its guidance range.

Cerner Corporation (NASDAQ:CERN) also ended the quarter with strong bookings results, which were 44% above the third quarter bookings in the year-ago period and also an all-time high at $1.59 billion.

“I am very pleased with the success we are having in the marketplace. We maintain a positive outlook because of our large pipeline, broad solution and services offering, and strong competitive position,” Cerner President Zane Burke said during the call.

Hedge funds that we track were not overly bullish on Cerner, owning just 1.50% of its shares on June 30. Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital held the largest stake in Cerner among the 27 funds with long positions in the stock.

In the food industry, Papa John’s Int’l, Inc. (NASDAQ:PZZA) has recoiled by 11.28% to $60.32, after reporting lower third quarter 2015 revenues of $389.3 million, down from the $390.4 million in sales in the year-ago period. Papa John’s Int’l, Inc. (NASDAQ:PZZA) also reaffirmed its 2015 diluted earnings per share guidance range of $2.04-to-$2.10, excluding the $0.20 impact of a legal settlement representing a pre-tax expense of $12.3 million. The legal settlement stems from allegations that delivery drivers were not reimbursed in accordance with the Fair Labor Standards Act. The settlement, which included approximately 19,000 drivers of the company, was given a preliminary approval by the court and was recorded in the quarter which ended June 28, 2015. Papa John’s Int’l, Inc. (NASDAQ:PZZA) continues to deny any liability or wrongdoing in the matter, as stated in a Form 8-K filed on November 3. 13 investors in our database held a combined 4.50% of Papa John’s outstanding shares, valued at just under $137 million as of June 30.

We study the disappointing results of two more companies on the following page.

Enphase Energy Inc (NASDAQ:ENPH), with a market capitalization of $165.75 million, has sank by 37.90% to $2.31 per share this morning amid a “more challenging than expected” fourth quarter in 2015, its President and CEO Paul Nahi confessed. The power company reported third quarter 2015 net income of $624 million, or $0.01 per share, which was lower than the $813 million, or $0.02 per share in earnings from the third quarter of 2014. Meanwhile, non-GAAP operating income for the third quarter of 2015 was $4.9 million, compared to $4.8 million in the prior-year period.

Enphase Energy Inc (NASDAQ:ENPH) reported total revenue for the third quarter of 2015 of $102.9 million, an increase of 4% compared to the $99.1 million it pulled in during the third quarter of 2014. However, it expects a fourth quarter revenue decline, driven by a correction of higher inventory levels in its distribution channel and softer overall market demand, according to Enphase Energy Inc (NASDAQ:ENPH) CFO Kris Sennesael.

Nahi added that amid a challenging quarter, “[We] are confident in our ability to drive our product costs down significantly over the next 24 months, improving our competitive position. In addition, we expect to drive new revenue streams from our AC Battery storage system, as well as the Enphase Home Energy Solution.”

Enphase lost a lot of popularity in the second quarter among the investors we follow, with ownership among them falling to 14 from 24, and the value of their collective stakes being nearly halved, to $70.49 million.

In the real estate arena, Zillow Group Inc (NASDAQ:Z & ZG) released its third quarter 2015 financial statement, posting an EBITDA which was beyond expectations as the company concluded a transition period as it combines its Zillow and Trulia ad platforms.

Zillow Group Inc (NASDAQ:Z AND ZG) shares lagged by 7.80% to $27.22 per share in morning trade on the results.

“We finished this integration four months ahead of schedule, and are ending 2015 in tremendous shape. Zillow Group will enter 2016 with the potential for robust sustainable growth in the years ahead,” Zillow Group CEO Spencer Rascoff said.

On a pro forma basis, Zillow Group Inc (NASDAQ:Z AND ZG)’s total revenue jumped to $176.8 million in the third quarter of 2015, from the $155.8 million which was reported in the third quarter of 2014. Significantly increased pro forma adjusted EBITDA was recognized in the most recent quarter that ended, at $29.5 million, compared to the $19.5 million reported in the prior-year period.

Zillow also lost a good deal of support during the second quarter, as hedge funds appear to have anticipated the travails of many of these companies. The number of investors long Zillow among the 730 that we track fell to 23 from 36, and the value of their holdings fell substantially, to $652 million. Billionaire John Paulson was among the investors to sell out of the stock in the second quarter, selling all 200,000 shares he had held on March 31.

Disclosure: None