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Why U.S. Steel, Pentair, and Lindsay Slumped Today

Dan Caplinger, The Motley Fool

Tuesday was an ugly day on Wall Street, as major market benchmarks closed lower across the board. The primary culprit for the downbeat mood among investors was an escalation in rhetoric on the issue of trade, with the White House threatening new tariffs on goods from the European Union and thereby reopening a second front in what could become a persistent trade war. Some companies saw their shares fall much further than the overall market because of their unusually concentrated exposure to international trade. U.S. Steel (NYSE: X), Pentair (NYSE: PNR), and Lindsay (NYSE: LNN) were among the worst performers. Here's why they did so poorly.

U.S. Steel tests investors' mettle

Shares of U.S. Steel fell 10% after investors reacted negatively to a variety of factors affecting the steelmaker. On one hand, any negative trade news has tended to hit U.S. Steel's stock, because even though its domestic business arguably benefits from tariffs, its global competitiveness tends to suffer. Yet analysts at Credit Suisse downgraded the steel giant's stock from neutral to underperform, citing higher costs of producing flat rolled steel and a loss of market share in serving auto manufacturers as adding up to an overall decline in U.S. Steel's leadership role in the industry. The analysts slashed their price target by $8 to just $13 per share, and that could bode poorly for the steelmaker's prospects for years, as a glut of supply is expected for the market in the early 2020s.

Hot steel coming out of a forging oven in two long strips.

Image source: U.S. Steel.

Pentair warns of a sluggish quarter

Pentair's stock dropped 13.5% after the water solutions specialist released disappointing preliminary financial results for the first quarter. Adjusted earnings declined from year-ago levels by roughly 12%, falling well short of the expected 6% to 12% gain on the bottom line for Pentair. CEO John Stauch pointed to "adverse cold and wet weather in our higher margin aquatics and ag-related businesses" as being the primary drag on Pentair's overall results. The company also cut its full-year 2019 guidance for earnings by $0.20 to $0.25 per share, and that has many investors worried that Pentair might need to take further action to offset weaker industry conditions throughout the remainder of the year and heading into 2020.

Lindsay deals with downbeat farmers

Finally, shares of Lindsay fell 9.5%. The irrigation and infrastructure equipment and technology provider said that its revenue plunged 16% during its fiscal second quarter, and even after accounting for some one-time impacts to its bottom line, Lindsay's net income came in at just $200,000 for the period. CEO Tim Hassinger noted that trade tensions between the U.S. and China affected irrigation system sales because farmers are nervous that retaliatory tariffs will cause Chinese importers to keep shunning their produce. Lindsay shareholders had similar concerns last quarter, and it looks like at least so far, the company hasn't been able to address its issues effectively enough to satisfy investors.

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Dan Caplinger 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.