When Things go Wrong
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No one bats a thousand percent in baseball. And that goes for investing in the markets as well.
Sometimes bad things are going to happen, like yesterday when both Stella Jones Inc (SJ) and Element Fleet Management Corp (EFN) both sold off sharply yesterday after announcing their earnings. I had highlighted both of these stocks as investing ideas in the last few months. That's the market. Sometimes bad things are going to happen. The best way to protect yourself when your blindsided by these unpleasant events is first to know what you own and keep your emotions in check. Stand back and evaluate the situation and decide weather you should continue to hold, sell or lighten up. You might even want to add to your position. It's up to you. As a do-it-yourself investor you are in charge of your investment portfolio and only you know about your current financial situation. Another question to ask yourself, is how much of my portfolio do these stocks make up?
For disclosure purposes I hold Stella Jones, but not Element Fleet. I checked in with AI to get the lowdown on what happened yesterday to these two stocks.
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Both companies reported their Q3 2026 financial results on November 4, 2026, and earnings misses alongside temporary execution headwinds triggered the sharp sell-offs on the TSX.
Here is a breakdown of what hit each stock:
1. Stella-Jones Inc. (TSX: SJ)
Stella-Jones reported Q3 2026 top-line revenue of $979 million (a modest 2.2% YoY increase) and adjusted EPS of $0.93, which fell short of market expectations (consensus was looking for over $1.00+ EPS and revenue around $1.01 billion).
Fuel Cost Spike: Management cited roughly $10 million in unanticipated higher fuel costs during the quarter, directly eating into operating margins.
Pricing Lags in Residential Lumber: Rising wholesale lumber prices forced Stella-Jones to raise prices, but implementation lags meant cost pressures weren't immediately passed along to customers in Q3.
Margin Compression: Adjusted EBITDA fell to $159 million (16.2% margin) compared to $171 million (17.8% margin) a year ago.
Expansion Downtime: Operations in their steel structures segment saw temporary downtime related to capacity expansion at their Candiac facility, shaving off ~$7 million in top-line growth.
Management's Response: Executives announced a new Performance Optimization Program targeting up to $100 million in cumulative savings over three years, but near-term margin targets were pushed out closer to 2028, leading analysts to pull back near-term price targets.
2. Element Fleet Management Corp. (TSX: EFN)
Element Fleet reported Q3 2026 results that missed consensus expectations on the bottom line, prompting immediate analyst downgrades.
Earnings Miss: EFN logged a slight miss on quarterly profit metrics despite continued top-line revenue and cash flow growth.
Street Downgrades: Wall Street and Bay Street reacted quickly—most notably, TD Securities downgraded EFN from Buy to Hold and aggressively cut its price target from $31.00 down to $22.00.
Multiple Compression: Given that EFN had been priced for high operational execution, the combination of a quarterly earnings miss and a high-profile broker downgrade sent retail and institutional investors to the exit doors simultaneously, driving the stock down nearly 11% in a single session.
Key Takeaways
Both sell-offs offer concrete examples of execution/timing mismatches rather than structural thesis breakdown:
SJ suffered from temporary cost-lag mismatches (higher fuel and unrecovered lumber inflation), which compressed EBITDA margins while long-term utility pole volumes remained positive.
EFN suffered from elevated market expectations where a slight operational miss triggered a swift re-rating and analyst price-target reduction.
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