Shares in residential and commercial sensing and controls company Resideo Technologies (NYSE: REZI) slumped by 15.5% by 11:30 a.m. today.
The move comes due to the company’s earnings report, and more pertinently, its second-quarter guidance and management’s commentary on evolving market conditions
Resideo Technologies disappoints the market Despite beating market expectations for the first quarter and reaffirming its 2026 outlook, the market focused on the lower-than-anticipated second quarter guidance and the pressures on profit margins coming from rising freight and fuel costs, and CEO Jay Geldmacher noting that “the high-end residential audio visual market has been softening.” The margin pressures from fuel and freight costs aren’t surprising in an environment where the ongoing closure of the Strait of Hormuz has sent oil prices gushing higher and impacted shipping costs due to diversions caused by the inability to ship through the Strait. Given that backdrop, the last thing investors want to hear about is a softening in one of its higher-ticket price end markets. Management intends to raise prices to offset cost increases, and it maintained full-year guidance for total net revenue of $7.8 billion to $7.9 billion and adjusted earnings per share (EPS) of $3 to $3.20.
Still, the market stressed the guidance for second-quarter net revenue of $1.916 billion to $1.94 billion and adjusted EPS of $0.71 to $0.75, compared to Wall Street consensus expectations of $1.978 billion and $0.84, according to S&P Global Market Intelligence. Where next for Resideo Technologies Management believes the implementation of price increases will offset the cost increase. That remains to be seen, and the weakness in the high-end residential market is a watch item.