Why Shutterstock, FLIR Systems, and Chesapeake Energy Slumped Today — The Motley Fool

U.S. stocks soared today, paring the month’s steep losses with corporate earnings season now in full swing.

But the rising tide didn’t lift all boats. Disappointing quarterly reports from Shutterstock (NYSE:SSTK) and FLIR Systems (NASDAQ:FLIR) left both stocks reeling today, while Chesapeake Energy (NYSE:CHK) plunged on news of a big acquisition. Read on to learn more.

Shutterstock’s top-line shortfall

Shares of Shutterstock lost 12.6% after the stock media leader delivered mixed third-quarter results relative to expectations.

Shutterstock’s quarterly revenue climbed 7.5% year over year to $151.6 million, led by growth from both its e-commerce and enterprise channels. On the bottom line, that translated to adjusted net income of $13.4 million, or $0.38 per share, up from $10.9 million, or $0.31 per share in the same year-ago period. Analysts, on average, were anticipating slightly lower earnings of $0.37 per share on higher revenue of $157.9 million.

“We achieved another solid quarter, delivering continued organic revenue growth year-over-year, as customers continue to use Shutterstock’s creative platform for their content and design needs,” elaborated founder and CEO Jon Oringer. “In addition to the growth in the business, we’re realizing the benefits of successfully managing our costs and achieving operational efficiencies across the Company, as evidenced by strong cash flow generation and improving margins.”

For the full-year 2018, however, Shutterfly expects revenue of $625 million to $630 million, marking a $5 million reduction from the high end of its previous range. It also called for 2018 adjusted EBITDA of roughly $105 million, near the bottom end of its previous range of $105 million to $110 million.

FLIR Systems goes cold

FLIR Systems stock declined 12.9% after the thermal imaging camera specialist posted an underwhelming third-quarter report. Quarterly revenue declined 6.4% year over year to $434.9 million, primarily because a 3.1% increase in organic sales wasn’t enough to offset lost revenue from its previously divested security businesses. FLIR’s adjusted net income increased 9.6% year over year to $80.3 million, or $0.57 per share. By comparison, most analysts were looking for roughly the same adjusted earnings on higher sales of $445.5 million.

But CEO Jim Cannon insisted he was “pleased” with the company’s quarter. 

“We delivered strong performance reaching our highest quarterly gross margin, operating margin, and operating cash flow in over five years,” he added. “We also continued organic revenue growth despite challenging year-over-year comparables.”

For 2018, FLIR expects revenue of $1.78 billion to $1.80 billion, and adjusted earnings per share of $2.17 to $2.22. Wall Street was already modeling earnings near the high end of that range on revenue of $1.81 billion.

Chesapeake’s dilutive acquisition

Finally, shares of Chesapeake Energy plunged 12.1%. The oil and natural gas exploration and production company agreed to acquire industry peer WildHorse Resource Development (NYSE:WRD) in a cash-and-stock deal worth $3.977 billion based on yesterday’s close and including the assumption of $930 million in WildHorse’s debt.

WildHorse common shareholders will be able to choose to receive either 5.989 shares of Chesapeake common stock for each share they own, or a combination of 5.336 shares of Chesapeake stock and $3 in cash. Putting aside management’s claims that the acquisition will enhance the company’s oil growth platform and accelerate progress toward key financial goals, these new shares mean significant dilution to existing Chesapeake investors. 

The purchase has already been approved by both companies’ boards of directors, but still needs to receive shareholder approvals and pass regulatory muster. It should close in the first half of 2019 assuming all goes as planned, at which point WildHorse investors will own as much as 45% of the combined company, depending on how many shareholders opt for the dilutive all-stock option.

Steve Symington has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.