5 Stocks in the Red on Friday Following Weak Earnings

by: Alex Shadunsky

With earnings season in session, volatility continues to be high and there were a number of big losers on Friday.

Avid Technology (NASDAQ:AVID) tumbled 25% after announcing weak Q2 results. The company reported revenues of $161.3 million for the quarter, compared to $162.2 million for the same period in 2010. The non-GAAP net loss for Q2 was $3.9 million, or $0.10 per share, compared to a non-GAAP net loss of $2.0 million, or $0.05 per share, for Q2 of 2010. Analysts were expecting EPS of $0.09. Despite the weak results, the company was upbeat and said that its business is sound.

Healthways (HWAY) closed 13% lower after missing Q2 estimates. The company reported that revenues for the quarter were $169.6 million compared with $175.5 million for the second quarter of 2010. Net income for the second quarter of 2011 was $5.8 million, or $0.17 per diluted share vs. the $0.18 analyst estimate. The company said that its operational and financial performance for the second quarter of 2011 was on track with the quarterly progression it expected. As a result it is affirming its revenue and earnings guidance for 2011. Healthways' contracting and implementation results thus far during 2011, and additional contracts it expects to sign over the remainder of the year, validates its expectation that 2011 will be a year in which it establishes a solid foundation of business development activity that will begin to drive growth in 2012 and beyond.

Air Transport Services Group (NASDAQ:ATSG) fell 8% after announcing the possible loss of a customer. The company said that it has been advised by its second-largest customer, DB Schenker, concerning its plans to adopt a new operating model that phases out the dedicated air-cargo network supported by Air Transport’s airline subsidiaries, Air Transport International (ATI) and Capital Cargo International Airlines (CCIA). While Air Transport continues to evaluate that notice in the context of its other communications with DB Schenker, it expects a reduction in its role as a provider of main-deck freighter lift for DB Schenker in North America.

The firm estimates that on an annualized basis, each of its eight DC-8 and eight 727 aircraft, dedicated to the DB Schenker network generates approximately one cent per share in earnings after tax. The company cannot yet determine, however, when or how many of those aircraft will be removed from DB Schenker service, nor how readily it can deploy them with other customers or otherwise realize their value. If all of the DC-8 and 727 aircraft currently dedicated to DB Schenker are eventually removed from service, the company projects an annual reduction in required capital maintenance expenditures of $10 to $15 million.

EZCORP (NASDAQ:EZPW) tumbled 9% after reporting weak Q3 earnings. EPS for the quarter was $0.53, an increase of 32% y/y but below the consensus of $0.54. Total revenues were $203.2 million, up 17%, with same store revenue up 7%. The company reaffirmed that it expects fiscal 2011 earnings per share, excluding the first quarter one-time charge related to the retirement of the former Chief Executive Officer, to increase 30% year-over-year to $2.55 ($2.41 on a GAAP basis).

YRC Worldwide (NASDAQ:YRCW) fell 9% after reporting Q2 earnings. YRC Worldwide reported a net loss of $39 million, compared to a net loss of $10 million reported for the second quarter of 2010, which included an $83 million after-tax benefit for a fair value adjustment to an equity-based award. Revenue for the second quarter of 2011 was $1.257 billion and consolidated operating loss was $2 million, which included $17 million of restructuring professional fees. As a comparison, the company reported consolidated operating revenue of $1.119 billion for the second quarter of 2010 and consolidated operating income of $48 million, which included an $83 million benefit for a fair value adjustment to an equity-based award and $9 million of restructuring professional fees.

The company added that with the operating momentum it achieved during the second quarter, which continued to-date into July, it expects to achieve y/y revenue growth and adjusted operating income for the remainder of 2011. In addition, the company has the following updated expectations for full year 2011: gross capital expenditures up to $125 million; excess property sales in the range of $30 million to $40 million; cash interest of approximately $30 million per quarter, post restructure; effective tax rate of 5%.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.