Stocks fell off from highs of the day on Wednesday, but two of the major benchmarks still ended the session in the green. The Dow Jones Industrial Average (DJINDICES: ^DJI) closed just short of 25,000 and the S&P 500 (SNPINDEX: ^GSPC) posted a small gain.
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Data source: Yahoo! Finance.
A spate of earnings reports and a rise in crude oil prices propelled energy stocks, with the SPDR S&P Oil & Gas Exploration & Production ETF (NYSEMKT: XOP) gaining 2.2%. Concerns about rising rates eased today, hurting bank stocks; the SPDR S&P Regional Banking ETF (NYSEMKT: KRE) fell 1.9%.
As for individual stocks, Chesapeake Energy (NYSE: CHK) reported blowout earnings and Roku (NASDAQ: ROKU) beat expectations but shares sank anyway.
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Chesapeake Energy soars on turnaround hopes
Shares of natural gas producer Chesapeake Energy soared 21.7% after the company reported better-than-expected fourth-quarter results on strong production gains and cost savings, and increased its forecast for 2018 production. Revenue jumped 24.6% to $2.52 billion, compared with analyst expectations of $2.3 billion. Adjusted earnings per share came in at $0.30, compared with $0.07 in the period a year earlier and Wall Street estimates for $0.24 per share.
Average daily production was 593,200 barrels of oil equivalent (BOE), up 15% from Q4 last year and 10% sequentially. Combined production and general and administrative expenses were $3.84 per BOE, down 10% from last year. Chesapeake raised its outlook for production in 2018 to increase 1% to 5%, adjusted for asset sales, after delivering a forecast for flat production growth in 2018 just over two weeks ago.
Chesapeake's shares were hammered in 2017, losing 44% as the company sold off wells in order to pay down debt by $1.3 billion and return to growth. The earnings beat and good news on production growth had investors believing that the turnaround could be taking hold, even though the company still has a long way to go, and shares are still selling for less than half of their 52-week high.
Roku surprises with a profit
Roku, the maker of streaming-media devices, reported Q4 results that beat expectations but shares tanked anyway, falling 17.7%. Revenue increased 28% to $188.3 million compared with the analyst consensus for $182.5 million in sales. Wall Street was expecting Roku to report a per-share loss of $0.10, but the company earned $0.06 per share instead.
Active accounts increased 44% to $19.3 million, streaming hours grew 55%, and average revenue per user grew 48% to $13.78.
Roku reports its business according to two segments: player and platform. Unit sales of the hardware players increased 8% year over year, but a 14% decline in average selling price resulted in a 7% decline in segment revenue to $102.8 million. Where Roku really makes its money is the platform business, which includes advertising and content distribution. Platform revenue grew 129% to $85.4 million and generated a 74.6% gross margin, down from 77.5% in Q3. The rapid growth of the platform segment caused the company's overall gross margin to increase to 39% from 30% a year ago.
Looking forward, Roku projected Q1 revenue of $120 million to $130 million, which was below analyst expectations of $132 million. However, the forecast for full-year revenue between $660 million and $690 million was largely above Wall Street's estimate of $662 million.
It would be tough to find fault with Roku's results last quarter, and the lowball guidance for next quarter would hardly seem to be an issue, given that expectations for the full year are well on track. But even after today's setback, the stock has roughly tripled since the IPO less than five months ago, so this may just be a case of investors adjusting near-term expectations and taking some profits.
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