Wisconsin companies share in stock market’s volatile first quarter

Employees work in the finishing and packaging area at the Quad/Graphics printing operations in Sussex last week. Quad had a nice gain in share price during a rocky first quarter.



By Paul Gores of the Journal Sentinel

The stock market resembled a thrill ride in the first quarter, with shares of some Wisconsin companies joining in the harrowing journey.

“It was really marked by volatility,” said Willie Delwiche, investment strategist at Milwaukee-based Robert W. Baird Co. Inc. “It was kind of a tale of two quarters within a quarter. The first six weeks it was like straight down, and the second six weeks it was basically straight up.”

As pessimism peaked on Feb. 11, the Dow Jones industrial average and Standard Poor’s 500 Index were down more than 10% for the year and appeared destined to go lower. However, that turned out to be the bottom, with stocks that were oversold in the panic starting their climb back.

When the quarter closed, the Dow was up 1.5% and the SP 500 had inched 0.07% higher.

In Wisconsin, shares of commercial printing and marketing services company Quad/Graphics Inc., after hitting a low for the quarter of $7.85 per share on Jan. 14, started on a mostly upward trajectory. When the quarter ended March 31, Quad/Graphics closed at $12.94, making its share price the biggest first-quarter percentage gainer — at more than 39% — on a list of the state’s publicly traded companies tracked by the Morningstar Wisconsin Ticker.

While it was among stocks that sputtered late in 2015 (Quad traded in the low $20s earlier that year) and were dumped amid the early 2016 frenzy to exit the equities market, Sussex-based Quad/Graphics helped its rebound with some aggressive cost management and productivity efforts announced in February, along with better-than-expected fourth-quarter earnings.

“I think they presented with their numbers a somewhat favorable outlook,” said John Collopy, who follows the stocks of Wisconsin firms as director of research for Oshkosh-based Carl M. Hennig Inc. “They were taking steps to straighten out their problems from an income statement standpoint.”

The stock of lighting manufacturer Orion Energy Systems Inc. landed at the bottom end of the Morningstar Wisconsin Ticker in 2016’s first quarter. Investors fled the Manitowoc company after a sluggish quarter that included revenue that was nearly $10 million below Wall Street’s expectations. In the first quarter, Orion’s stock price decreased to $1.39 from $2.17, a nearly 36% slide.

Collopy, for one, is not optimistic about where the stock market is headed the rest of this year.

“I officially have said I think we’re in a bear market,” he said. “The market is going to struggle here for the next several quarters.”

Brian Kilb, chief operating officer at Landaas Co. in Milwaukee, is more upbeat on the market outlook. That’s because of some of the things investors feared most earlier this year — such as more oil price reductions, plans for four interest rate increases by the Fed, a massive slowdown in China — have not panned out as originally projected.

“If you look at the combination of those things, I think people feel better than they did when we hit bottom in February,” Kilb said.

While corporate earnings for the first quarter, which are just starting to be announced, are expected to be down, there could be some earnings surprises later in the year, Kilb said.

“If you look at the lay of the land and look forward, I think there are more things on the positive side than the negative side,” Kilb said. “So I think there’s some reason to believe we gain some momentum as we continue through this year.”

The presidential election adds another dash of uncertainty to the market outlook, which doesn’t help, said Baird’s Delwiche.

Delwiche said he expects more volatility this year.

“On the positive side, the rally that we got in the second half (of the first quarter) was marked by broader participation than we’ve seen in a while,” Delwiche said. “That’s an indication that things are looking up in the stock market. The negative is that valuations remain excessive, and it’s a little bit hard to get really excited about stocks when you’re paying elevated PEs (price-earnings ratios) like we are right now.”

Delwiche offered this projection: “My guess is that we continue to be in kind of a choppy environment. I don’t know that we go back to test the lows that we saw in February, but it’s always a little hard right here to argue that we’re on the cusp of a breakout.”

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