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Why Sonic, National Beverage, and Aquinox Pharmaceuticals Slumped Today

Steve Symington, The Motley Fool

Stocks declined on Wednesday as investors continued to worry about U.S. trade policy, but not before attempting to rally earlier in the session after President Trump announced plans to update existing laws to limit or prevent investments by China in U.S. tech companies. The move marked a less restrictive approach than the alternative of relying on direct executive actions.

Still, some individual companies fared worse than most. Read on to learn why Sonic Corporation (NASDAQ: SONC), National Beverage (NASDAQ: FIZZ), and Aquinox Pharmaceuticals (NASDAQ: AQXP) plunged today.

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Sonic's bland quarter

Shares of Sonic fell as much as 12.5% early in the session, then partially recovered to close down 4.5% after the drive-in restaurant chain announced mixed quarterly results.

On the one hand, Sonic's quarterly revenue declined 4.6% year over year to $118.3 million -- below consensus estimates for $120 million -- including the effects of both refranchising transactions and a 0.2% decline in systemwide same-store sales. On the other hand, that translated to 21% growth in adjusted earnings per share to $0.52, above expectations for earnings of $0.49 per share.

For perspective, when Sonic released preliminary results ahead of conference presentations a few weeks ago, it told investors to expect same-store sales to be roughly flat as compared to the year-ago period. Still, CEO Cliff Hudson noted the company's comps performance reflected a "material improvement in trend, driven by ongoing initiatives to increase marketing reach, refresh our advertising creative and introduce relevant new products."

Finally, despite its relative earnings outperformance this quarter, Sonic revised its full-year guidance for earnings per share to be between $1.45 and $1.49 (narrowed from between $1.43 and $1.50 previously).

That's not to say Sonic didn't make progress this quarter, but it's clear its top-line miss has left a bad taste in shareholders' mouths.

National Beverage goes under the SEC's microscope

National Beverage stock dropped 8.9% after The Wall Street Journal reported (may require subscription) that the maker of flavored seltzer beverage LaCroix has declined to explain its colorful claims of growth as requested by the U.S. Securities and Exchange Commission (SEC).

In particular, National Beverage CEO Nick Caporella has raised eyebrows across Wall Street by claiming that the company has "magnified" two internal sales metrics -- velocity per outlet (VPO) and velocity per capita (VPC) -- in response to "growth never before thought possible."

So in January, the SEC asked National Beverage to elaborate on those metrics. It also asked the company to offer "comparative amounts or explain why you do not believe this disclosure is necessary."

However, National Beverage ultimately opted for the latter.

"This information is as secretive as the formulas of our beverages and should not be disclosed to our competition," National Beverage controller Gregory Cook wrote in their response to the SEC.

Of course, that doesn't mean National Beverage has done anything wrong. But the snub undoubtedly calls into question whether the company is wrongly withholding information that could help investors more effectively form a buy or sell thesis for the stock.

Aquinox Pharma's massive disappointment

Shares of Aquinox Pharmaceuticals plummeted a jaw-dropping 84.7% after the company announced its bladder pain drug candidate, rosiptor (AQX-1125), has failed to meet its primary endpoint.

CEO David Main called it a "disappointing result for Aquinox and for patients," noting that the "robust and well-conducted trial" failed to demonstrate a benefit of rosiptor over placebo for treating interstitial cystitis/bladder pain syndrone (IC/BPS). As such, Aquinox is halting all further development of rosiptor.

Main further promised they will perform a "thorough evaluation of our pipeline and other strategic options available to the company," but elaborated that they won't be able to provide further guidance until later this year. 

In the meantime, considering rosiptor was Aquinox's only product in development, it's hard to blame investors for running to the exits today.

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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.