S&P 500’s Weekly Laggards: Guidance Cuts And Litigation Risks Weigh On Stocks
During the week ending September 5, the S&P 500 remained relatively flat, down 0.12%. This was in contrast to several notable S&P 500 stocks, which declined sharply due to a mix of earnings outlook revisions, regulatory risk, downgrades, demand concerns, and leadership changes.
Macroeconomic data for the week indicated signs of a weakening labor market, with nonfarm payrolls increasing by only 22,000 in August, significantly below the forecast of 75,000. Additionally, the unemployment rate rose to 4.3%. This data reinforces the expectation that the Federal Reserve will proceed with its widely anticipated interest rate cut later this month. See an important current market context – S&P 500 Index To Crash 8%?
We will discuss the top-moving stocks in more detail below. That being said, if you seek an upside with less volatility than holding an individual stock, consider the High Quality Portfolio. It has comfortably outperformed its benchmark—a combination of the S&P 500, Russell, and S&P MidCap indexes—and has achieved returns exceeding 91% since its inception.
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1. Lululemon (NASDAQ: LULU): Guidance Cut Triggers Selloff
LULU stock plunged 17% after management cut full-year revenue and EPS guidance despite beating earnings estimates for the quarter. The guidance reset—not quarterly performance—sparked the latest selloff. U.S. same-store sales dropped 4%, offset by robust 17% growth in China and 12% elsewhere internationally. Now, the stock trades at just 1.8x trailing revenues, dramatically below its five-year average P/S ratio of 6.9, but persistent domestic softness and near-term headwinds may keep investors wary for now.
2. Kenvue (NYSE:KVUE): Litigation Overhang from Tylenol
KVUE stock fell 10% following reports that the U.S. Health and Human Services Secretary may link its Tylenol brand to autism risk when used by pregnant women. Tylenol generates nearly 10% of Kenvue’s sales, so new litigation momentum could be significant. The stock is now valued at 2.6x trailing revenues, matching its recent 2-year average, and reflects uncertainty hanging over the legal landscape for this 2023 Johnson & Johnson spin-off.
S&P 500 Top Losers For The Week Ending Sep 5
3. TransDigm (NYSE: TDG): Ratings Downgrades and Aftermarket Uncertainty
TDG stock declined 9% as research firms downgraded the stock, citing risks around the normalization of its profitable aftermarket aerospace business and a lackluster recent quarter. Despite the selloff, TDG still trades at a premium 9.5x trailing revenues—higher than its 5-year average P/S of 7.9—which may reflect both ongoing confidence in long-term growth and heightened expectations after a strong run.
4. Constellation Brands (NYSE: STZ): Beer Demand Weakness
Constellation Brands (STZ) dropped 8% after projecting lower fiscal 2026 sales and earnings due to weakening beer demand in its key Hispanic American market. At $150 per share, STZ trades at 2.7x trailing revenues, well below its five-year average of 4.7x, but it could well be a value trap unless trends in beer consumption reverse.
5. MGM Resorts (NYSE: MGM): Leadership Change and Las Vegas Slowdown
MGM stock lost 8% after the announcement that longtime COO Corey Sanders will exit as Las Vegas visitation declines continue—a trend now seven months running, with July visitor counts down 12% year-over-year. The stock trades at just 0.6x trailing sales, far below its 1.6x five-year average. However, continued margin pressures and demand softness may justify the discounted valuation.
Remember, there always remains a meaningful risk when investing in a single stock, or just a handful of stocks. Consider the Trefis High-Quality (HQ) Portfolio, which, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.
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