7 Reasons to Worry About Next Week
Earnings season is off to a reasonably good start, with more positive bottom-line surprises than implosions.
Don't get too comfortable. Just wait until you hear what corporate America has to say next week.
There are still plenty of companies posting lower earnings than they did a year ago. Let's go over a few of the names that are expected to go the wrong way on the bottom line next week.
Latest Quarter EPS (estimated)
Year-Ago Quarter EPS
|Weyerhaeuser (NYS: WY)||$0.12||$0.25||Add|
|Amazon.com (NAS: AMZN)||$0.24||$0.51||Add|
|Human Genome Sciences (NAS: HGSI)||($0.38)||($0.22)||Add|
|iRobot (NAS: IRBT)||$0.26||$0.27||Add|
|Akamai (NAS: AKAM)||$0.33||$0.34||Add|
|Electronic Arts (NAS: ERTS)||($0.05)||$0.10||Add|
|Ford (NYS: F)||$0.45||$0.48||Add|
Source: Thomson Reuters.
Clearing the table
Let's start at the top with Weyerhaeuser. The forest products giant is likely to earn roughly half as much as it earned during the same quarter a year earlier. Given the slowdown in real estate and foreclosure-facing homeowners hesitant to spring for house improvement projects, lumber's been a hard sell in this country.
Amazon.com is also eyeing half of its former profitability. Investors are cool with that in this particular case. The leading online retailer has made it clear that it's valuing growth over margins as if broadens its base of Kindle owners. Things will get even more interesting when the Kindle Fire hits the market next month.
Human Genome Sciences popped higher this week on buyout speculation, but the only reason that unconfirmed rumors are having any kind of effect is because Human Genome's stock had shed nearly half its value in recent months. Fundamentally speaking, Human Genome has seen better days. It has posted wider year-over-year deficits in each of the three previous quarters, and the pros see the company stretching that streak to four quarters when it reports on Tuesday.
If you think bomb-seeking robots on the battlefield and dirt-sucking orbs in your living room are cool, get to know iRobot. Of the seven companies on this list, iRobot has the best shot of actually posting improving bottom-line results. The consumer and military robotics company has beaten Wall Street estimates by at least $0.04 a share in each of its eight previous quarters. If it can stretch that streak to nine quarters iRobot will be landing ahead of the $0.27 a share it earned a year earlier.
Akamai is the country's leading content-delivery network. In other words, it helps popular websites serve up Web pages, streaming video, and file downloads faster and more efficiently. This has become a highly competitive market, and you're seeing the damage that can do to margins. Akamai's revenue is actually expected to grow at a 10% clip, despite the bottom-line slip.
EA is in the game -- or is it? Despite another successful Madden football installment -- and the fact that the football season actually kicked off on time despite its labor issues -- Electronic Arts is eyeing a small deficit this time around.
Finally, we have Ford. The automaker avoided a labor dispute this week, as a new agreement was approved by 63% of its workers. Dodging a strike is welcome news, but consumers are apparently weary of shelling out big money for new cars in this delicate economic climate.
Why the long face, short-seller?
These companies have seen better days. The market has rewarded many of these stocks with reasonable gains over the past year, but they still haven't earned those upticks.
The good news here is that Wall Street already expects these companies to deliver shrinking bottom lines. In other words, the bad news is already baked into the shares.
The more I think about it, the less worried I become.
How do you think these stocks will fare when they report next week? Share your thoughts in the comment box below.
At the time this article was published The Motley Fool owns shares of. Motley Fool newsletter services have recommended buying shares of iRobot, Ford Motor, and Amazon.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story, except for Ford. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
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