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Q2 Earnings Remain Strong, But TWTR, MGM, & LUV Disappoint

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Thanks to decent jobless claims figures and a plethora of strong earnings reports, stocks moved higher almost across the board early Thursday. With Q2 earnings season panning out well for most, there’s an even harsher spotlight on the few companies—like Twitter (TWTR - Free Report) , Southwest Airlines (LUV - Free Report) , and MGM Resorts (MGM - Free Report) —that disappointed investors this morning.

Interestingly enough, all of the aforementioned companies actually surpassed earnings estimates, but their share prices are slumping for a variety of other reasons. For example, Twitter’s loss of two cents per share was significantly narrower than the Zacks Consensus Estimate of 12 cents, but investors were more focused on the company’s stagnant user figures.

MAUs in the quarter were 328 million, which was unchanged from the first quarter of 2017 and up just 5% year-over-year. DAUs were up about 12%. Total revenues slumped about 4.7% to $573.8 million, although that result did surpass the Zacks Consensus Estimate of $536.8 million (also read: Twitter Q2 Loss Narrows, Stagnant User Base Hits Stock).

Despite beating on both the top and bottom line, shares of Twitter opened at $17.36 on Thursday, nearly 11.5% lower than Wednesday’s close. The stock dipped to an intraday low of $16.85 per share in morning trading, and investors will hoping to avoid a double-digit loss on the day will now need quite the mid-day bounce.

Southwest was also able to post a double beat, with earnings of $1.24 per share and revenues of $5.74 billion surpassing the respective Zacks Consensus Estimates of $1.20 and $5.73 billion. Revenue per available seat mile—the ever-important RASM figure—was up a respectable 1.5% year-over-year.

Southwest’s problem was its outlook for the third quarter, a period that includes most of the busy summer travel season. The company is expecting RASM growth of just 1%, and unit costs—excluding fuel, special items, and profit sharing—are expected to increase about 2% to 3%. Higher costs and sluggish unit revenue is, of course, not a great combination for an airliner (also read: Southwest Airlines Beats on Q2 Earnings).

Shares of Southwest opened about 5% lower on Thursday, eventually hitting an intraday low of $53.77 in morning trading. However, the stock has already started to bounce back a bit; shares were down less than 3% heading into the afternoon.

Casino giant MGM Resorts also reported on Thursday morning. The company posted earnings of 31 cents per share, which beat the Zacks Consensus Estimate of 28 cents, but revenues of $2.64 billion lagged our consensus estimate of $2.66 billion.

Improvements in Las Vegas helped MGM’s profits growth more than 19% year-over-year, but weak results at MGM China contributed to its revenue miss. MGM China’s net revenue fell 1% year over year to $449 million due to lower revenues from main-floor table games, which isn’t the best result considering the overall improvement of the Macau region (also read: MGM Resorts' Q2 Earnings Beat on Higher Revenues).

MGM shares quickly slumped to an intraday low of $32.31, a drop of more than 4.6% from yesterday’s close. The stock has since recovered slightly, but it is unlikely to win over too much investor favor given the relative strength of its competitors’ earnings reports so far.

Want more stock market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!

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