U.S. stocks closed lower on Tuesday, as investors continued to weigh corporate earnings and tensions between Russia and Ukraine. After the closing bell, King Digital Entertainment shares tumbled after the company lowered its full-year outlook and revealed quarterly sales below Wall Street estimates.
The Dow Jones Industrial Average lost 9.44 points or 0.06 percent, to close at 16,560.54. The S&P 500 fell 3.17 points or 0.16 percent, to end at 1,933.75. The Nasdaq Composite was down 12.08 points, or 0.27 percent, to finish at 4,389.25.
King Digital Entertainment PLC (NYSE:KING) stock plunged more than 20 percent on Tuesday after the “Candy Crush Saga” maker reported fiscal 2014 second-quarter earnings of 59 cents per share, excluding items, on $594 million in revenue. The company issued adjusted EPS of 45 cents during the same period a year earlier while revenue increased $138 million, or 30 percent, compared to the second quarter of 2013.
Although King’s quarterly earnings results were in line with Street estimates, sales came in below forecasts. Wall Street had expected King to report adjusted earnings of 59 cents a share on $608 million in revenue, according to analysts polled by Reuters. For the quarter ended June 30, fully reported profit rose to $165.4 million, or 52 cents a share, from $125.92 million, or 39 cents a share in the year-ago period.
“While our second-quarter gross bookings came in below our expectations leading us to reduce our outlook for full-year 2014 growth rates, from a profitability perspective, the business continued to perform well, delivering adjusted EBITDA margins of 42 percent and generating healthy cash flows of $154 million to boost cash and cash equivalents to more than $800 million,” Riccardo Zacconi, chief executive officer of King, said in the company’s second-quarter earnings statement.
Gross bookings were $611 million for the quarter, an increase of $130 million, or 27 percent, compared to a year earlier, and a decrease of $30 million, or 5 percent, compared to the previous quarter. King Digital, the maker of games such as “Bubble Witch 2 Saga” and “Farm Heroes Saga,” opened for public trading in March and, ahead of the company's earnings announcement on Tuesday, has fallen 4.21 percent since then. The initial public offering (IPO) raised $500 million and the company sold stock to initial investors at $22.50 a share. The stock hit a high of $21.43 on July 14.
“The decreases in both gross bookings and revenue from first-quarter 2014 to second quarter 2014 were primarily due to lower gross bookings from Candy Crush Saga, which were only partially offset by increased gross bookings and revenue from Farm Heroes Saga and Bubble Witch 2 Saga following its launch on Web and mobile in June 2014,” the company said in the report.
For the current quarter, King Digital said it expects gross bookings between $500 million and $525 million for the quarter ending Sept. 30, 2014. Meanwhile, the company forecasts gross bookings to come in between $2.25 billion and $2.35 billion for the full-year as a result of lower-than-expected second-quarter bookings.
Separately, King announced it will pay a special dividend of $150 million to shareholders on Sept. 30. “Based on the cash generative strength of our business, we are pleased to announce a special dividend of $150 million to enhance returns for our shareholders,” Zacconi said.
Shares of King Digital Entertainment closed Tuesday's trading session up 0.17 percent at $18.20. The stock plunged 20.66 percent to $14.44 in after-hours trading.