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Goodyear Tire, Skechers, Mattel & more

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A mechanic stacks used tires outside the service bay of a Goodyear Tire & Rubber Co. auto garage in Shelbyville, Kentucky.

Luke Sharrett | Bloomberg | Getty Images

A mechanic stacks used tires outside the service bay of a Goodyear Tire & Rubber Co. auto garage in Shelbyville, Kentucky.

Check out the companies making headlines midday Friday:

Skechers — The shoemaker’s stock jumped 18 percent after the company gave strong profit guidance for the quarter ahead. Skechers reported 2018 was “a year of record sales,” with the fourth quarter breaking above $1 billion in sales for the first time.

Goodyear Tire — Shares of the tire manufacturer fell nearly 10 percent and hit a new 52-week low Friday after missing Wall Street’s expectations for the fourth quarter. The company cited currency headwinds and lower volume for the miss.

Mattel — Shares of the toy company rose more than 19 percent on Friday following fourth quarter earnings that beat analyst estimates. The toy maker posted a profit of 4 cents per share, surprising analysts who expected a 16-cent loss. Mattel’s revenue also successfully beat analysts expectations by $120 million.

Inogen — Inogen’s stock slid nearly 7 percent after short-seller Muddy Waters Research said it has taken a short position in the maker of oxygen therapy. “We believe management has created egregiously false narrative regarding their total addressable market and growth,” said the short seller in a tweet.

Qorvo — Shares of the semiconductor company fell more than 4 percent Friday after it guided fourth-quarter profit of $1.05, well below consensus estimates of $1.33. “Qorvo’s March quarterly guidance reflects weakness in the broader smartphone market, partially offset by content gains with the leading Korea-based smartphone manufacturer and double-digit, year-over-year growth in IDP,” Chief Financial Officer Mark Murphy said Thursday.

Hasbro — The toy company’s fourth-quarter profit fell short estimates by a wide margin Friday morning. Investors were partially pacified after the company outlined a slate of new toys for 2019. Shares of the toy maker were down 4.3 percent Friday after falling as much as 10 percent before the opening bell.

Electronic Arts — The video game publisher jumped more than 11 percent in mid-day trading Friday, a sharp rebound after disappointing earnings earlier in the week. Electronic Arts said its newly released game “Apex Legends” topped 10 million players in less than a week.

Motorola Solutions — Shares of the telecommunications company jumped 12 percent on Friday after reporting quarterly earnings that Wall Street’s expectations for the fourth consecutive quarter. Motorola’s revenue also surpassed analyst expectations.

Coty — Shares of the beauty company shot up 28 percent after Coty beat second-quarter earnings expectations by 2 cents a share. Coty’s rally comes after the stock has lost more than 55 percent in the last 12 months as the cosmetics company tries to turn around declining revenue and sales.

— CNBC’s Kate Rooney, Michael Sheetz, Matt Lavietes and Nadine El-Bawab contributed to this reports.



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Booming rally in small-cap stocks reaches historic proportions

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Traders and financial professionals work ahead of the opening bell on the floor of the New York Stock Exchange (NYSE), January 14, 2019 in New York City.

Drew Angerer | Getty Images

Traders and financial professionals work ahead of the opening bell on the floor of the New York Stock Exchange (NYSE), January 14, 2019 in New York City.

Small caps’ snapback is flashing an ominous signal.

The Russell 2000 has rallied 16.5 percent in 2019, the third best start to a year since the index’s inception. However, small caps’ future is bound to be bleaker if history is any guide. According to Jefferies, in the previous five best starts to a year, small caps suffered weaker-than-average performance in the following three months and squeezed out only a 1.2 percent gain for the rest of the year.

“Can’t draw up a better start to new year than this, however we need a pullback,” Steven DeSanctis, a Jefferies strategist, said in a note on Sunday. “We’d like the market to take a breather.”

He added that earnings have shown strong double-digit growth, but small caps still trail large company earnings, and the outlook for first and second quarter is “in the red.”

Small-cap stocks dipped into bear market territory when recession fears triggered a massive sell-off in December. Now, the group is up 24 percent since Christmas Eve, but the strong comeback might be overlooking the poor earnings outlook. Wall Street is now foreseeing a 2.9 percent decline in small-cap earnings in the first quarter, according to FactSet. In addition, the China trade uncertainty is clouding the road ahead.

“If the U.S. does not get a trade deal done with China over the next few weeks, a recovery in earnings growth is unlikely, as companies put off capex until 2020,” DeSanctis said. “This is one of the biggest risks for the market and explains why we have not raised our Russell 2000 year-end target of 1550.” The index is currently trading at around 1,569.

Growth stocks are seen beating value stocks in the small-cap world given the earnings growth, DeSanctis pointed out.

“The next two quarters should be weak and even down year-over-year for Small and Large caps. We think this supports our Growth over Value theme. [Growth stocks] do look better with the price to book and price to sales ratios double digits below average,” he said.

The strong rally coupled with downward earnings revisions have also made small caps expensive again in a short period of time. The Russell 2000 is trading at 19.8 times forward earnings.



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Papa John’s to struggle despite activist, analyst downgrades to sell

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A customer enters a Papa John's restaurant in Louisville, Ky.

Luke Sharrett | Bloomberg | Getty Images

A customer enters a Papa John’s restaurant in Louisville, Ky.

Papa John’s investors will be disappointed in the near term as sales struggle, according to one Wall Street analyst.

Stifel’s Chris O’Cull downgraded the stock to sell from hold on Monday and wrote that the company’s recent promotions suggest the embattled pizza maker is struggling to compete for customers in the face of low-price deals at rivals Dominos, Pizza Hut and Little Caesars’. But for the restaurant chain to bolster sales, the analyst believes it will need to commit to subsidizing franchisees, a direct threat to earnings over the next few years.

“In order for Papa John’s to drive transactions we believe it will need to commit to an everyday low price menu that will probably hurt franchisees’ profits until consumer perception of its value changes,” O’Cull wrote in his note. “These offers are clearly designed to drive transactions, but to be successful they must increase transactions enough to offset the dollar impact of the discount, otherwise the results lower store margin percentage and dollars.”

Stifel reduced its 2019 earnings per share estimate to 80 cents from $1.20 (well below the Wall Street consensus estimate of $1.19) and cut its price target to $35. The new price target represents 22 percent downside from Friday’s close of $45.26.

The downgrade comes about two weeks after the company announced a $200 million investment by activist hedge fund Starboard Value. Papa John’s said Starboard CEO Jeffrey Smith will become its chairman following the fund’s investment in the form of a convertible stock purchase of 11 to 15 percent.

Activist investors typically accumulate stakes in companies they believe are undervalued and encourage executives to adopt changes they think will boost returns for shareholders. Such demands can range from board seats and CEO replacement to an entire sale of the business.

Papa John’s stock was unchanged in premarket trading Tuesday morning.



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UAE announces IDEX weapons deals as Middle East arms spending climbs

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Attendees walk the floor at IDEX, the International Defence Exhibition and Conference, in Abu Dhabi in 2015.

Markus Matzel | ullstein bild | Getty Images

Attendees walk the floor at IDEX, the International Defence Exhibition and Conference, in Abu Dhabi in 2015.

The United Arab Emirates announced about $1.35 billion in defense deals with local and international companies on the opening day of IDEX 2019, the International Defence Exhibition and Conference, in Abu Dhabi on Sunday.

Of the 33 deals announced Sunday, 18 were domestic and 15 were with foreign firms, the latter accounting for just under $1.1 billion of the total, an IDEX spokesperson said during a news conference.

American companies took the greatest share of foreign sales, at about $490 million. Led by Raytheon, Lockheed Martin and Hesco, the deals will provide missiles, new radar systems capabilities and defensive shelters for the UAE military, respectively. Others notching sales to the country included France’s Thales, Australian firm EOS Defense and Germany’s Rheinmetall Electronics.

The deals with 18 domestic firms highlight the small Gulf country’s investment in developing its own defense manufacturing industry as part of a drive to diversify its economy away from oil.



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