Why U.S. Steel, Biglari Holdings, and Charter Communications Slumped Today

Friday was a relatively calm day on Wall Street, with major benchmarks closing with only minimal changes. Earnings season continues to go well, with high-profile companies generally seeing solid growth and positive impacts from tax reform and a healthy economy. Yet in some cases, company-specific factors held certain stocks back, producing dramatic losses. U.S. Steel (NYSE: X), Biglari Holdings (NYSE: BH), and Charter Communications (NASDAQ: CHTR) were among the worst performers on the day. Here’s why they did so poorly.

U.S. Steel has a minor meltdown

Shares of U.S. Steel dropped 14% after the company reported its first-quarter financial results. At first glance, the steelmaker seemed to see considerable strength in its performance, including sales that climbed 16% from year-ago levels and adjusted earnings that reversed a year-ago loss. U.S. Steel also seemed confident about its asset revitalization program, which it argued is already starting to produce favorable results. Yet investors seemed uncomfortable projecting forward any positive impact from possible tariffs, especially in light of President Trump’s meeting with German Chancellor Angela Merkel. With extensive debt and further challenges ahead, U.S. Steel still has a long way to go before shareholders can feel entirely comfortable.

Sheet steel coming out hot from a furnace on a conveyor belt.

Biglari goes dual

Biglari Holdings stock plunged 20% in the wake of the company’s decision to create a dual class of stock. Under the deal, investors will get 10 shares of Class A voting stock and 100 shares of Class B non-voting stock for every 100 Biglari shares they currently own. Class A shares will have five times the economic rights in liquidation as Class B shares. Some speculate that the reason for the move could be to allow CEO Sardar Biglari and his Biglari Capital hedge fund, which owns the majority of outstanding shares currently, to sell off the resulting Class B shares for cash without losing voting control of Biglari Holdings. With the shares selling at a discount to the value of the company’s assets, Biglari Holdings is an example of how CEO control can sometimes be a negative for a stock when a controversial executive is at the reins.

Charter takes a dive

Finally, shares of Charter Communications fell almost 12%. The cable giant said that it lost 122,000 residential video subscribers and 52,000 residential voice subscribers in the first quarter of 2018, continuing a negative trend that has persisted for a long time. Broadband internet continued to do well for the company, posting subscriber gains of 331,000 on the residential side, but investors still worry about the cord-cutting trend that could lead to reduced earnings growth in the long run. The fact that Charter continued to see earnings climb shows that the trend hasn’t had as much of a negative impact as some fear, but the cable giant will have to work to avoid any deterioration in its financial condition in the future.

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