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

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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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Whether elite hedge funds collectively like a stock or not is an important metric to consider, as these large investors show a great level of skill and expertise when it comes to picking stocks. Over the last few years equity hedge funds have trailed the market by a large margin, but that’s mostly due to their hedging and short positions, which perform poorly in a bull market. Their long positions performed far better, especially their small-cap picks, which have the potential to beat the market by 95 basis points per month on average, as our backtests showed. Our small-cap strategy involves imitating a portfolio of the 15 most popular small-cap picks among hedge funds and it has returned 118% since August 2012, beating the S&P 500 ETF (SPY) by over 60 percentage points (read more details here).

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.

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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.

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

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