The Wall Street Journal - 07.10.2019

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TECHNOLOGY: SMALLER MEDICAL PROVIDERS GET BURNED BY RANSOMWARE B5

BUSINESS&FINANCE

deal-making, has kept his

Murray Energy Corp. from

following a dozen other U.S.

coal companies into bank-

ruptcy over the past decade.

Murray Energy, which ex-

panded even as other produc-

ers collapsed into chapter 11,

last week entered a forbear-

ance agreement with its lend-

ers after skipping an interest

payment on $1.7 billion in

debt. This buys the coal-min-

ing company more time to ne-

gotiate a restructuring deal

possibly before a potential fil-

ing for bankruptcy.

This comes asForesight

EnergyLP, a coal company in

which Murray Energy owns a

majority stake, also missed an

interest payment last week.

Both companies are working

with a 30-day grace period to

hold separate restructuring

PleaseturntopageB2

Robert Murray, the coal ex-

ecutive known for his outspoken

advocacy of the industry and

close ties to President Trump,

could be on the brink of losing

his companies as the power

industry shifts away from coal

to cheaper fuel sources.

Mr. Murray, through a com-

bination of bold strategy and

BYSOMABISWAS

ANDALEXANDERGLADSTONE

Fuel Shift Pushes Coal Baron’s

Companies Closer to the Edge

The well-connected Robert Murray has so far kept from following other mining firms into bankruptcy.

JEFF SWENSEN FOR THE WALL STREET JOURNAL

ENTERTAINMENT

‘Joker’ dominates

the box office amid

stepped-up police

presenceB2

BUSINESS

Shopping-mall owner

gambles on

e-commerce site

for outlet goodsB3

LastWeek:S&P2952.01g0.33% S&PFINg2.22% S&PITÀ1.11% DJ TRANSg3.01% WSJ$IDXg0.29% LIBOR3M2.027 NIKKEI21410.20g2.14% See more at WSJ.com/Markets

thing on my arm, it would be

‘stocks chase earnings,’” said

Mike Bailey, director of re-

search at FBB Capital Partners.

“We’re a little more cautious

than we were even a couple

weeks ago.”

Data last week showed do-

mestic factory activity hit a

10-year low in September,

while the services sector ex-

panded at the slowest pace in

three years. Friday’s jobs re-

port eased some of those

fears, showing that the U.S. la-

bor market is a relative bright

spot, with unemployment hit-

ting a 50-year low.

A gloomy economic outlook

isn’t the only headwind for big

corporations. The U.S. dollar

has rallied this year, poten-

tially making it more difficult

for companies with large in-

ternational businesses to

profit from shoppers abroad.

Also in the mix is a prolonged

trade conflict with China and

worries over how it might

dent an already slowing U.S.

economy.

Mr. Bailey said he has been

looking to buy shares of com-

panies that could fare better

in an economic downturn,

while unloading exposure to

those that could be caught in

the trade war between the U.S.

and China, such asMicrochip

TechnologyInc.

Although trade tensions

have lately taken a back seat

to other growth concerns, in-

vestors are watching for signs

of their impact on businesses.

The term “tariff” was men-

tioned on earnings calls more

frequently in the second quar-

ter than in the first, according

to FactSet, a trend that could

continue. U.S. leaders are set

to resume talks with their Chi-

nese counterparts this coming

week.

Wynn Resorts warned last

month that it expects profit

for July and August to be

weaker than last year. Its

Macau casino business has

been hurt by “a variety of fac-

PleaseturntopageB4

The outlook for third-quar-
ter corporate profits is dark-
ening, a threat to a stock mar-
ket that is already off to the
worst start to a quarter since
2016.
A flurry of earnings reports
in coming weeks will mark the
latest test for stocks after a
rocky stretch of economic data
exacerbated worries that a
global manufacturing slow-
down is trickling into the U.S.
Jitters about the economy
have pushed the S&P 500
down 0.8% to start the fourth
quarter, its weakest perfor-
mance to start a quarter since
January 2016. The index is up
18% for 2019 but is nearly flat
for the previous 12 months—a
period that includes last fall’s
brutal selloff and this year’s
bounceback.
Investors expecting a
strong earnings season to pro-
pel stocks out of this malaise
could be in for disappoint-
ment.
Dozens of companies have
tried to temper investors’ ex-
pectations ahead of coming re-
ports, saying earnings will
come in lower than analysts
had expected, according to
FactSet.Wynn ResortsLtd.,
Macy’sInc. andTyson Foods
Inc. are among the companies
that have moderated expecta-
tions recently.
Analysts expect earnings
for companies in the S&P 500
to fall 4.1% for the third quar-
ter, according to FactSet data,
in what would mark the big-
gest year-over-year drop since

2016. In recent months, Wall
      Street analysts have lowered
      their earnings expectations for
      all 11 sectors in the S&P 500,
      from energy to technology.
      “If I had to tattoo some-

BYGUNJANBANERJI

Earnings Outlook Threatens Stocks

Companies scale back

forecasts, risking new

dent to market after

quarter’s rough start

U.S. health officials are con-

fronting a sprawling black

market for vaping products as

they seek to combat two

health crises, a mysterious

lung illness and a surge in

teen vaping.

While the market-leading

startupJuul LabsInc. has be-

come synonymous with vaping,

it sells only nicotine liquids.

There are hundreds of other

vaping brands—containing nic-

otine, compounds derived from

cannabis or other substances—

sold online, in vape shops, con-

venience stores and marijuana

dispensaries. Many of them are

compatible with Juul vaporiz-

ers, though they haven’t been

authorized by Juul.

No single product or ingre-

dient has been identified as the

PleaseturntopageB4

BYJENNIFERMALONEY

ANDDANIELAHERNANDEZ

Vaping

Knockoffs

Stymie Fix

For Crisis

August, according to Nielsen.

As a result, older brands, in-

cluding Nature Valley, Special-

K and Nutri-Grain, that com-

mand the majority of snack-

bar sales have lost market

share.

General Mills said last

month that U.S. retail sales of

snack bars dropped 4% in its

latest quarter. Chief Executive

Jeff Harmening said in an in-

terview that the Minneapolis

company is investing in im-

provements such as a crispy-

wafer Nature Valley bar and a

Fiber One bar with more pro-

tein and less sugar. “We are on

the right track,” he said.

Kellogg CEO Steve Cahillane

has said the company’s Special

K bars are associated with

low-fat diets that have fallen

out of fashion in favor of high-

protein and low-carbohydrate

eating habits.

“Wehavetodoabetterjob

at innovating and making our

foods relevant for today’s food

beliefs,” Mr. Cahillane said

about Special K bars at a con-

ference last month.

Big companies have also ac-

quired and invested in faster-

growing brands.HersheyCo.

last month purchased One, a

maker of low-sugar, high-pro-

tein bars, for $397 million.

Mondelez InternationalInc.

earlier this year purchased a

PleaseturntopageB2

Americans are grabbing

more snack bars, but the big-

gest brands are getting over-

looked.

Sales are falling forGen-

eral MillsInc.’s Nature Valley

bars andKelloggCo.’s Special-

K bars, while snack-bar sales

are rising overall, including

for entrants with high fruit-

and-nut content such as Kind

bars. The divergence is the lat-

est example of packaged-food

makers missing growth in

products much like their own.

Danone SA started losing

market share to Chobani a de-

cade ago when Greek yogurt

gained popularity. Kraft Heinz

Co.’s Boca veggie burgers ha-

ven’t benefited from the sales

boom for patties from Beyond

Meat Inc. and Impossible

Foods Inc.

Now a trend toward snack

bars that are higher in protein

and low in sugar is leaving

older brands behind.

Americans are eating more

snack bars and more snacks in

general. Snack-bar sales in the

U.S.—including nutrition and

performance bars—rose 3.2%

last year, according to re-

search firm Mintel, outpacing

overall packaged-food sales.

Sales for older cereal-and-

granola bar brands, though,

fell 3.7% in the year through

BYANNIEGASPARRO

Traditional Snack Bars

Face Nutty Conundrum

INSIDE

The IPO market has gone
from hot to not.
Shares of newly public com-
panies, earlier this year one of
the hottest investments on
Wall Street, are now in a
slump after investors soured
on unprofitable startups from
Uber Technologies Inc. to
WeWork.

Shares of technology start-

ups and other companies that

went public in the U.S. this

year are trading roughly 5%

above, on average, their prices

at their initial public offerings,

well short of the 18% gain in

theS&P500index,according

to Dealogic data. That is a re-

versal from earlier in the year,

when IPO shares were big out-

performers.

IPO-stock performance is

the worst it has been since at

least 1995, according to a re-

cent research note from Gold-

man Sachs, whose analysts

measured it relative to a broad

stock-market index.

That and recent market gy-

rations have helped bring IPO

activity to a virtual standstill

heading into what is tradition-

ally one of the busiest times of

year for new issues, as compa-

nies planning debuts wait for

conditions to improve.

The stall upends expecta-

tions that 2019 would be a re-

cord year for IPOs by money

raised. It also highlights the

risks for private investors who

have endured long periods of

losses funding a crop of com-

panies that are older and big-

ger than IPO candidates in

previous cycles. That could

put a chill on a private-fund-

ing market that has been red

hot and hamper the ability of

the next generation of start-

ups to raise seed capital.

The slowdown could also

hit fees at the banks that un-

derwrite IPOs and push some

companies to rethink plans for

traditional IPOs in favor of al-

PleaseturntopageB5

BYMAUREENFARRELL

IPO Setbacks Create Challenges for Unicorns

–30

–25

–20

–15

–10

–5

0

5%

–15% –10 –5

0510

Source: FactSet

*Data as of Sept. 30; If a company reported as of Sept. 30, actual EPS is used in calculation;

Any fiscal quarter ending in August, September or October is included as 3Q 2019.

EARNINGS

REVENUE

Communication

services

Consumer

discretionary

Consumer

staples

Energy

Financials

Health

care

Industrials

Information

technology

Materials

Real

estate

Utilities

S&P 500

S&P 500 quarterly

earnings growth

RealtyIncome

Nike

MicronTechnology

McCormick&Co

ConagraBrands

WynnResorts

Freeport-McMoRan

LBrands

Apache

VornadoRealtyTrust

25.7%

22.4

19.5

13.2

10.6

–19.2

–24.8

–32.2

–42.6

–73.5

Select companies with the largest gains

and losses from a month ago in projected

3Q 2019 earnings per share*

S&P 500 earnings and

revenue growth projections

for3Q2019,bysector

Madeon: Oct.3 June30

25

–10

–5

0

5

10

15

20

%

2015 ’16 ’17 ’18 ’19

3Q2019

projection

-4.1%

When Lou Barberini started

selling stocks in 1983, his job

was to cold-call prospective in-

vestors with the chance to get

into something hot. His take:

$200 in commissions per trade.

Back then, brokers sold sto-

ries as much as they sold

stocks. What was hot, he said,

was often determined by crafty

brokers at Lehman Brothers

and then leaked down Wall

Street where the same story

could be spun for months. The

entertainment company MGM

was a big one: The studio

would spin off its movie li-

brary, the sales pitch went, just

as the VHS tape made its way

into U.S. living rooms.

“You sold the sizzle, not the

steak,” said Mr. Barberini, who

worked at Drexel Burnham

Lambert and is now a retire-

ment plan analyst at Nich Cap-

ital Partners in San Francisco.

PleaseturntopageB2

BYLISABEILFUSS

ANDALEXANDEROSIPOVICH

Brokerage

Fe e Wa r

Squeezes

Revenue