Bed Bath & Beyond (BBBY) was a great performer until it was not. The stock price of this retailer ran up into late 2013 and then ran back to that level in late 2014 before beginning an epic decline from $79.64 to its current price of $14.86.
The drop $64.78 is 81%. Today is fell another -21% from $18.81 to $14.86. What is causing the drop. It is pretty simple. The company continues to miss earnings estimates. The current quarter estimate was $0.51 and the company reported $0.36. A miss of $0.15.
In the prior quarters this year, the stock beat estimates in June and April. However, in April guidance was poor and it fell from $21.50 to $17.21 in one day. So not only is it earnings but guidance.
Since 2014 to now, the company has missed estimated in 12 of the last 19 quarters. One month after earnings, the stock has been lower on 16 of the last 19 quarters.
So what is the take away? Once a company begins to miss earnings and gives bad guidance, then the stock price is toast. The lesson is to avoid stocks that start to miss on estimates and guidance. Invest in companies that beat estimates and give positive guidance and you will be rewarded.