5 Reasons to Worry About Next Week
The economy is showing signs of fumbling the recovery.
Ahead of this morning's payrolls report, paycheck processor ADP reported that private employers added just 119,000 jobs last month, well shy of the 177,000 additions that were expected.
It's not just iffy news at the macro level.
There are more than a few companies that aren't pulling their own weight in this supposed economic recovery.
There are still plenty of names posting lower earnings than they did a year ago. Let's go over a few of the companies that are expected to go the wrong way on the bottom line next week.
Latest Quarter EPS (estimated)
Year-Ago Quarter EPS
|Pitney Bowes (NYS: PBI)||$0.50||$0.53||Add|
|Primo Water (NAS: PRMW)||($0.08)||$0.00||Add|
|Activision Blizzard (NAS: ATVI)||$0.04||$0.13||Add|
|Electronic Arts (NAS: EA)||$0.17||$0.25||Add|
|Tesla Motors (NAS: TSLA)||($0.69)||($0.44)||Add|
Source: Thomson Reuters.
Clearing the table
Let's start at the top with Pitney Bowes.
The metered mail giant has been a surprisingly consistent performer. Corporate mail may seem like a cyclical business, but Pitney Bowes has managed to jack up its yield for 30 consecutive years.
Now you see why Pitney Bowes making the cut this week is important. Obviously, the company can't keep hiking its dividends if profitability goes the wrong way.
Primo Water offers exchangeable bottled water in three- and five-gallon jugs through a growing network of grocery store chains and other retailers. The company is also trying to get its Flavorstation carbonated beverage system off the ground.
Primo took a hit back in March when it posted disappointing quarterly results and hosed down its outlook. The company revised its guidance targeting an adjusted profit of no more than $0.12 a share for all of 2012, less than half what Wall Street was forecasting. The market's bracing for a small deficit this time around.
Activision Blizzard and Electronic Arts are the country's two largest video game companies. It's convenient that they're reporting during the same week, and it's also telling that each company is expected to fall well short of last year's quarterly profit.
These have been trying times for the gaming industry. Hardware and software sales have been largely sluggish over the past three years. The growing popularity of casual and social games has carved the gaming giants out of the equation when it comes to mainstream audiences.
Sure, die-hard gamers still crave the depth of console games. The problem is in attracting the light gamer who now seems perfectly fine playing a Pictionary or Scrabble knockoff on a smartphone.
Activision Blizzard is hoping that Diablo III can spice things back up in two weeks. If that doesn't do the trick, there's always Call of Duty: Black Ops 2 in November. However, EA and Activision Blizzard didn't exactly wow gamers with their slates during the first three months of this year, and that's why analysts not only see the two companies posting declining bottom-line results but delivering negative revenue growth as well.
Finally, we have Tesla Motors. The cutting-edge maker of electric cars took its lumps earlier this year when reports surfaced of total battery failures. Investors aren't too worried about losses widening at the moment. All eyes are on this summer's rollout of the company's Model S sedan.
Plug-in vehicles have been a hard sell in this country so far, but demand for Tesla's cars has been high.
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.
If five reasons to worry aren't enough, let's make your future No. 6. There's a single shocking truth about your retirement that you may not know. It's part of a free report that won't be around forever so check it out now.
At the time this article was published The Fool owns shares of and has written calls on Activision Blizzard. Motley Fool newsletter services have recommended buying shares of Activision Blizzard and Tesla Motors. Motley Fool newsletter services have recommended creating a synthetic long position in Activision Blizzard. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.