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Why Applied Materials, Tesla, and Dean Foods Slumped Today

Steve Symington, The Motley Fool

Following robust gains on Thursday, major market indexes sustained their momentum to end the week on a high note, with both the Dow and S&P 500 posting modest increases.

But the rising tide didn't lift all boats. Here's why Applied Materials (NASDAQ: AMAT), Tesla (NASDAQ: TSLA), and Dean Foods (NYSE: DF) slumped today.

Applied Materials' disappointing outlook

Shares of Applied Materials dropped 7.7% after the semiconductor chip equipment specialist announced solid fiscal third-quarter earnings, but followed with disappointing forward guidance.

Red line with arrow indicating losses with stock market data in the background.

Image source: Getty Images.

Net sales increased 19% year over year to $4.47 billion, which translated to adjusted net income of $1.21 billion, or $1.20 per diluted share, up 40% from $0.86 per share in the same year-ago period. Analysts, on average, were looking for slightly lower earnings of $1.17 per share on revenue of $4.46 billion. 

For the current fourth quarter of fiscal 2018, however, Applied Materials expects net sales in the range of $3.85 billion to $4.15 billion, the midpoint of which would be roughly flat from a year ago. Applied Materials also called for quarterly adjusted earnings per share of $0.92 to $1.00, up 3% year over year at the midpoint. By comparison, most on Wall Street were modeling significantly higher fiscal Q4 revenue of $4.44 billion and earnings of $1.16 per share. 

CEO Gary Dickerson noted the company has seen "some near-term adjustments in customer spending." But he also insisted the company's "future outlook remains positive as the A.I.-Big Data era requires new breakthroughs in technology, from materials to systems, providing Applied Materials with a great opportunity to play a larger and more valuable role in the ecosystem."

Elon Musk says "the worst is yet to come"

Tesla stock fell 8.9% in the wake of CEO Elon Musk's wide-ranging interview with The New York Times.

On the heels of Musk's controversial tweet in which he suggested he was in the process of taking Tesla private -- a move that subsequently spurred an SEC probe over whether he was misleading investors -- Musk told the Times that this year "has been the most difficult and painful year of my career," calling it "excruciating."

Musk added that he has been working 120-hour weeks recently as the company strives to ramp production of its Model 3 sedans. But he further predicted that while Tesla's operational struggles are waning, from a "personal pain standpoint, the worst is yet to come."

The Times also cited sources saying that Tesla's board of directors has expressed concern over his workload and use of sleep-aid Ambien. As such, they're moving to "find a No. 2 executive to help take some of the pressure off Mr. Musk."

Dean Foods gets a downgrade

Finally, shares of Dean Foods lost 5% after J.P. Morgan analyst Ken Goldman reduced his rating on a food and beverage company from neutral to underweight and lowered his price target to $6. Shares closed yesterday at $8.72.

To justify his relative bearishness, Goldman argued that Dean Foods is facing falling demand and increased competition in its core milk business. The analyst also cited headwinds related to the shift toward private-label brands, cash constraints, and valuation concerns.

"The more we scrubbed the numbers," Goldman added, "the less confidence we had that Dean would hit Street forecasts for [earnings per share] in any of the next three years."

Dean Foods shares were already reeling after the company posted in-line quarterly results earlier this month, but simultaneously reduced its full-year guidance. Given today's downgrade, it's no surprise to see the stock dropping to fresh multiyear lows.

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Steve Symington has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Tesla. The Motley Fool has a disclosure policy.