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Why Resideo Technologies Stock Is Plummeting This Week
Key Points
Resideo released its fiscal Q2 report on Wednesday and outperformed Wall Street's sales and earnings forecasts.
Despite beats in fiscal Q2, the company's forward guidance underwhelmed the market.
The company completed its spin-off of ADI Global Distribution at the beginning of this month, and the restructuring has had a big impact on guidance.
Resideo Technologies (NYSE: REZI) stock is falling this week even though the company reported better-than-expected quarterly results. Heading into this Friday's market open, the stock was down 21.5% from its price at the end of last week's close. Meanwhile, the S&P 500 index was up 0.5%.
On Wednesday, Resideo published results for the second quarter of its 2026 fiscal year -- which ended July 4. While the company's sales and earnings for the period surpassed Wall Street's targets, disappointing forward guidance caused investors to sell out of the stock.
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Resideo posted a big earnings beat in fiscal Q2
While Resideo stock has gotten hit with a big post-earnings pullback, the company actually delivered a sizable earnings beat in fiscal Q2. The business reported non-GAAP (adjusted) earnings per share of $0.83 in the quarter, surpassing the average analyst estimate by $0.15 per share, thanks in part to tariff refunds helping to spur a 70 basis point improvement for its gross margin. Revenue of $1.98 billion also topped the average analyst forecast by roughly $40 million. Even though sales and earnings for the period exceeded Wall Street's average targets, investors weren't happy with the smart-home tech specialist's outlook.
What's next for Resideo?
Resideo completed its spin-off of ADI Global Distribution at the beginning of this month, and it's now issuing forward guidance without the inclusion of contributions from the unit. The company says that it expects full-year sales to be between $2.9 billion and $2.95 billion and that adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) will be between $605 million and $625 million. The spin-off of ADI represents a major restructuring move for Resideo, and it may take some time for the market to settle on how to value the substantially altered corporate entity and get a more detailed read on its performance outlook.
Keith Noonan 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.