Saturday, December 2, 2023
Stocks To Sell

The Top 3 Stocks to Dump After Disastrous Q3 Earnings

Source: chanpipat /

While the third-quarter earnings season has gotten off to an okay start, there have been a handful of ugly prints that raised eyebrows among investors. They also sent Wall Street analysts running to revise their future forecasts. Some notable names came out with disastrous Q3 financial results, hurting their reputations and sending their stock prices sharply lower. Blame for the poor showing has included a slowing global economy, rising fuel prices and recent geopolitical events. However, rising competition, declining profit margins and poor execution of new initiatives have also played a role.

Whatever the reasons, many well-known stocks are battered and bruised coming out of Q3 earnings season and look unlikely to recover in the near term. As such, current shareholders may want to head for the exits and investors should scratch these companies off their watchlists. Here are the top three stocks to sell after disastrous Q3 earnings.

Nokia (NOK)

European telecommunications giant Nokia (NYSE:NOK) prefaced its third quarter earnings by announcing it is cutting 14,000 jobs globally. Sadly, the job cuts turned out to be the most positive part of Nokia’s Q3 print, as the company reported a 69% plunge in its quarterly profit. Nokia also announced a 20% year-over-year decline in its Q3 revenue and said that it is taking aggressive cost-cutting actions to increase its operational efficiencies amid a challenging market. To that end, Nokia is reducing its global workforce to between 72,000 and 77,000 employees from 86,000.

One of the largest telecommunications equipment makers, Nokia said it is struggling with a slowing global economy and a decrease in infrastructure spending among mobile phone operators. Sales at Nokia’s biggest unit by revenue, its mobile network business, declined 24% year-over-year in Q3 while operating profits for the division fell 64% from 2022 levels. The poor Q3 results continue a downward spiral for Nokia, which has struggled for much of the last decade with a changing industry and a rise in global competition. NOK stock has fallen 32% this year and is down 43% over five years. At $3.18 a share, Nokia now trades as a penny stock. Time to sell.

United Airlines (UAL)

United Airlines (NASDAQ:UAL) has a problem. The carrier operates more flights to Israel than any other U.S.-based airline, with direct service from Washington, D.C.; Newark, New Jersey; and San Francisco, California. Now, United (and other U.S. carriers) have stopped all flights to Israel as war erupts in the Middle East. The halt of flights to Israel will negatively impact United’s profits in the current fourth quarter and beyond, warned the company when issuing its Q3 financial results. The lowered guidance sent UAL stock down 6% immediately, and the share price has now declined more than 12% since the Q3 print was made public.

The Israeli flight issue obscured what was otherwise a strong Q3 for United. The airline reported earnings per share (EPS) of $3.65 versus $3.35 which had been expected by analysts. Revenue for the latest quarter came in at $14.48 billion compared to $14.44 billion that was anticipated. The company’s revenue rose 12% from a year earlier. However, in addition to the cancellation of flights to Israel, United also warned that more expensive jet fuel will likely also negatively impact its future earnings. Management noted that jet fuel prices have increased 20% since the mid-July this year.

UAL stock is down 6% year-to-date and has decreased nearly 60% from five years ago, which was before the Covid-19 pandemic decimated the airline industry.

Tesla (TSLA)

Tesla’s (NASDAQ:TSLA) Q3 print was a doozy. The electric vehicle maker’s stock is down 17% after missing Wall Street’s expectations. The company led by Elon Musk announced EPS of 66 cents and revenue of $23.4 billion. Analysts who cover the company had expected a profit of 70 cents and sales of $23.9 billion for the July through September period. The company’s Q3 profit was down 37% from the same quarter of 2022. Tesla also reported that its gross profit margin fell to 16.3% in Q3, which was below the 17.5% forecast on Wall Street.

The bad news was spread across the board as Tesla’s operating profit margins came in at 7.6% for Q3, down 10 percentage points from a year ago. Looking ahead, Musk implied the price cuts the company made throughout this year could continue as Tesla tries to boost its global sales. The company cut prices aggressively this year to help drive sales volumes amid rising interest rates, a slowing global economy and increasing competition from other automakers. The average Tesla vehicle now costs $10,000 less than it did a year ago, said the company.

Musk also lowered expectations for the upcoming release of Tesla’s long-gestating Cybertruck, saying it will likely take a year or more before the electric pick-up truck is a significant profit driver for the company. TSLA stock is down less than 1% over the last 12 months amid volatile trading. Through five years, the stock is still up 860%. But where does Tesla go from here?

On the date of publication, Joel Baglole did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.

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