2023 has gone very well for stock market investors, with major market benchmarks bouncing significantly from 2022’s weakness. However, a big move lower on Thursday came on concerns about the Federal Reserve keeping interest rates higher for longer, and that caused the Nasdaq Composite (^IXIC) to lose ground. Friday morning’s futures market action suggested there could be more losses in store for the Nasdaq, with losses of another 1% or so.
A pair of Nasdaq stocks in particular reflected the negative sentiment on the Nasdaq right now. Cognex (CGNX -1.88%) and Texas Roadhouse (TXRH 0.80%) reported their latest quarterly results overnight, and what shareholders saw worried them about what the two companies’ future prospects could look like. Not all of their news was bad, but for the two stocks to rebound, investors will have to regain confidence that their businesses can rebound.
Cognex deals with a tough business environment
Shares of Cognex dropped 8% in premarket trading on Friday morning. The factory automation specialist reported fourth-quarter financial results that were consistent with its guidance but failed to generate the enthusiasm that shareholders had wanted to see.
Cognex’s financial figures were mixed. Revenue sank 2% year over year to $239 million, although sales figures bounced 14% from the third quarter of 2022. Net income rose 3% to $55.3 million, but after making allowances for extraordinary items, adjusted earnings of $0.27 per share were down 10% from year-ago levels and failed to match what investors had expected from the company.
The strength of the U.S. dollar played a key role in Cognex’s troubles, as the company gets about 60% of its revenue from outside the Americas. Yet Cognex also cited a challenging environment for its business, with some of its largest e-commerce customers hitting the pause button on making additional investments. The company also warned that the sluggishness has carried into the beginning of 2023.
Investors especially disliked Cognex’s short-term guidance, which called for first-quarter revenue of just $180 million to $200 million. That would be down from year-ago levels, and with expenses likely to rise, that could put further pressure on Cognex’s profits in the short run.
Texas Roadhouse gets burned
Meanwhile, in the restaurant stock space, Texas Roadhouse shares were down 5% in premarket trading. The move lower came despite some significant increases in key business metrics that reflected the recovery of the restaurant industry more broadly.
Texas Roadhouse’s fourth-quarter financials showed signs of strength. Revenue of $1.01 billion was up 13% year over year for the period, closing a 2022 year in which Texas Roadhouse saw sales rise 16%. Texas Roadhouse saw comparable restaurant sales rise just over 7%, with more patrons eating at restaurant locations rather than ordering food to go. Net income moved higher by 13% to $60 million, and that produced earnings of $0.89 per share, up 17% from the fourth quarter of 2021.
However, Texas Roadhouse still faced some headwinds. Commodity inflation and upward pressure on labor costs weighed on restaurant margin figures, although the restaurant chain’s cost-cutting efforts were effective in keeping its bottom line moving upward.
That’s likely what prompted Texas Roadhouse to keep its 2023 guidance unchanged in several key areas, expecting merely some level of positive comparable restaurant sales while still expecting 5% to 6% rises in food prices and wage costs. A planned menu price increase of 2.2% for late March could help ease the pain, but Texas Roadhouse could still see pressure on profits in 2023.
Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Cognex and Texas Roadhouse. The Motley Fool has a disclosure policy.