It's been a good year so far. With one more trading day to go, it seems as if we're heading toward our third consecutive week of stock gains to kick off 2012 just right.
Then again, when a 123-year-old icon -- Kodak -- filed for bankruptcy protection, maybe things aren't so rosy after all.
It's not just the distressed photography pioneer. There are more than a few companies that aren't pulling their own weight in this supposed economic recovery.
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
Netflix (NAS: NFLX)
Western Digital (NYS: WDC)
SanDisk (NAS: SNDK)
Mead Johnson Nutrition (NYS: MJN)
Procter & Gamble (NYS: PG)
Source: Thomson Reuters.
Clearing the table
Let's start at the top with Netflix.
Three months ago, analysts figured that the video rental giant would earn $1.09 a share in its final quarter of 2011. That was before the company posted its devastating third-quarter report, showing a sharp drop in subscribers. Netflix then warned that its bottom line will be in for a world of hurt in the coming quarters.
In other words, this should be the first of several quarters where Netflix posts year-over-year declines on the bottom line. Things won't get any easier early this year, as initial losses incurred in its international expansion markets force the company into posting quarterly deficits.
Western Digital is one of the two leading hard drive makers. One would think that this would be a rough time to be making traditional storage devices. PC shipments have been sluggish throughout 2011. The popularity of portable tablets and smartphones that rely on flash memory instead of hard drives is eating into the market.
However, that's not what's eating at Western Digital these days. There are capacity constraints and other limitations with flash memory, after all. No, the problem for Western Digital and its platter-spinning peers is that capacity has been kept in check after flooding in Thailand shut down many of the production facilities. Western Digital expects the second of its two factories damaged by the rising waters to open in March, resuming to earlier production levels by September.
SanDisk is at the other end of the storage niche. It's the leader in the flash memory that's storing data in tablets, smartphones, digital cameras, and even some lightweight laptops. The pros are eyeing only a modest dip in profitability at SanDisk, but it's still a baby step in the wrong direction.
Shares of Mead Johnson Nutrition took a hit last month after the death of a 10-day-old infant was originally linked to its Enfamil Premium Newborn infant formula. Several stores pulled the product as a result of the incident. The Food and Drug Administration cleared Mead Johnson Nutrition earlier this month, but now it needs to win back hesitant consumers who may have heard the grim news but not the redemptive conclusion.
Finally, we have Procter & Gamble. Analysts see the maker of Crest toothpaste, Pampers diapers, and several other products that may very well be in your home earning $1.09 a share in its latest quarter. The consumer products giant rang up net income of $1.13 a share a year earlier.
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. Lower earnings translate into higher earnings multiples, and nobody wants to see that happen.
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.
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At the time thisarticle was published The Motley Fool owns shares of Western Digital.Motley Fool newsletter serviceshave recommended buying shares of Procter & Gamble and Netflix. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.Longtime Fool contributorRick Munarrizcalls them as he sees them. He does not own shares in any of the stocks in this story, except for Netflix. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
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