5 Reasons to Worry About Next Week
The economy is showing signs of fumbling the recovery.
It certainly didn't help that the country's leading office supplies retailer posted weaker-than-expected quarterly results. What does it mean for the state of Corporate America if companies aren't comfortable ordering new printer cartridges or file cabinets?
Oh, and every week, we grow closer to that fiscal cliff that everyone's starting to get worried about.
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
|Barnes & Noble (NYS: BKS)||($1.00)||($0.99)||Add|
|Best Buy (NYS: BBY)||$0.31||$0.47||Add|
|Trina Solar (NYS: TSL)||($0.72)||$0.17||Add|
|Dell (NAS: DELL)||$0.46||$0.54||Add|
|Hewlett-Packard (NYS: HPQ)||$0.98||$1.10||Add|
Source: Thomson Reuters.
Clearing the table
Let's start at the top with Barnes & Noble.
No one is surprised that the last major book retailer standing is losing money. The superstore operator is throwing a ton of money into its fledgling Nook business. At the same time, folks just aren't buying physical books the way they used to.
It's hard to predict when the tide will turn for Barnes & Noble. It slashed Nook prices this past weekend, and it remains to be seen if it was a sign of desperation or if new models are on the way. Either way it's going to be more margin pain for the retailer.
Analysts see the company posting a slightly wider deficit than it did a year earlier, but it has missed even Wall Street's dreary profit forecasts way too often over the past year.
Best Buy is another struggling retailer, but at least the consumer electronics retailer is still profitable. However, it does share Barnes & Noble's dilemma of a digital revolution disrupting its model. The difference here is that Barnes & Noble's business is being threatened with obsolescence as more bibliophiles download formerly leafy reads. Best Buy is simply being challenged by the leaner operating models of online retailers that allow Web-savvy consumers to get better deals.
Trina Solar isn't really a surprise here. Most solar companies have seen their businesses deteriorate over the past year. Trina was profitable a year ago, but that's certainly not the picture today.
Dell and HP are PC makers. HP is still the global leader, but both companies are suffering from a lack of demand. It may have been the global recession that originally dried up demand for desktops and laptops, but now it's the growing popularity of "good enough" computing through smartphones and tablets.
Yes, there's still promise in selling servers, but Dell and HP need the corporate and consumer PC markets to bounce back if any kind of turnaround is possible.
It just doesn't seem likely in the near term. Wall Street's banking on both box makers to post lower earnings next week
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 translates 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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The article 5 Reasons to Worry About Next Week originally appeared on Fool.com.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.The Motley Fool owns shares of Best Buy.Motley Fool newsletter serviceshave recommended writing puts on Barnes & Noble. The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.
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