The market has seen an incredible run off its lows over the past four years. Chances are good that if you’ve owned a diversified portfolio of investments, you’re sitting on a handsome return. However, it wasn’t all sugar and spice for a handful of companies within the broad-based S&P 500 (INDEXSP:.INX) in the first-quarter. The index closed at an all-time high on Thursday, but these five companies were the worst of the worst in the first quarter. The good news is that one has a very good chance at rebounding in the second quarter.
Cliffs Natural Resources Inc (NYSE:CLF) (50.5%)
It was a horrendous quarter for Cliffs, a miner of iron ore and metallurgical coal, which lost half of its value. A cornucopia of analyst downgrades shelled the company after it reduced its quarterly dividend by a whopping 76% to $0.15 from $0.625. The most recent downgrade came courtesy of Morgan Stanley (NYSE:MS), which warned that new iron ore supplies in the U.S. may reduce iron ore pricing. Iron prices are well off their highs of $187 per dry metric ton, but they’ve also crept off their recent lows of just $99 per dry metric ton set last September.
J.C. Penney Company, Inc. (NYSE:JCP) (23.3%)
As unbelievable as this might be, struggling retailer J.C. Penney Company, Inc. (NYSE:JCP) shed only 23% in the first quarter despite reporting what I deemed to be the worst retail quarter ever. Its fourth-quarter report highlighted a 28.4% decline in total sales, a nearly 32% drop in same-store sales, and a 34.4% tumble in direct-to-consumer sales. Penney CEO Ron Johnson has backtracked on the company’s no-sale pricing policy, but it remains to be seen if customers will return or if the damage has already been done.
Peabody Energy Corporation (NYSE:BTU) (20.3%)
It definitely wasn’t a kind quarter to coal producers, with Peabody Energy Corporation (NYSE:BTU) shares shedding 20% after reporting dismal fourth-quarter results in late January. Coal prices have been under serious pressure because of low-cost natural gas, which has persuaded electric utilities to make the long-term switch from coal to natural gas. Reduced stockpiles of coal have helped somewhat stabilize prices, but the prospect of higher costs in its Australian mines and stagnant coal prices didn’t sit well with its shareholders this quarter.
U.S. Steel Canada Inc. (18.1%)
Another underperformer, another commodity-based company! This time it’s U.S. Steel, which saw its shares dip by 18% on the quarter as weak steel prices and tempered demand both domestically and overseas weighed on results. For 2012, U.S. Steel’s net loss widened to $124 million from $53 million in the previous year, but that’s primarily attributed to a whopping $353 million loss on the sale of U.S. Steel Serbia.
Garmin Ltd. (NASDAQ:GRMN) (17.9%)
Finally, navigation and GPS device maker Garmin shed nearly 18% during the quarter after its full-year outlook failed to impress investors. Garmin forecast a profit of just $2.30-$2.40 for the year on revenue of $2.5 billion to $2.6 billion as compared with estimates at the time calling for $2.89 in EPS on $2.77 billion in sales. Garmin continues to offer investors a premium dividend but is falling short in the innovation department, with numerous apps on smartphones and tablets replacing its products.
Which company has the best chance to bounce back?
As some of the greatest minds on Wall Street have stated before, stocks drop for a reason. As we’ve seen from these brief summaries, the drop in all five cases appears well justified. However, one company among the five has a very strong chance of a rebound in the coming quarters.