5 More Reasons Not to Worry About Next Year
Despite the fiscal cliff concerns, things are looking up for 2013.
On Monday I went over some of the companies that are expected to post improving bottom-line results next year. Analysts see far more companies going the right way on the earnings front this year than those that will take a step back.
Let's go over some publicly traded companies that are expected to stand tall next year by posting year-over-year improvement in profitability.
Company | Next-Year EPS (Estimated) | Current-Year EPS | My Watchlist |
|---|---|---|---|
Atlantic Power | ($0.06) | ($0.55) | |
OmniVision | $1.82 | $1.27 | |
Arena Pharmaceuticals | ($0.08) | ($0.31) | |
Questcor | $4.05 | $3.23 | |
Rentech | $0.12 | $0.06 |
Source: Thomson Reuters.
Clearing the table
Let's start at the top with Atlantic Power.
The company's power-generation projects sell electricity to utilities and other commercial customers. Atlantic Power is a big draw to income investors because of its meaty dividend that gets paid out monthly. The current yield is a beefy 10%, but investors have a right to be cautious. Atlantic Power has posted a loss from continuing operations in two of the past three years, and analysts see another year of red ink come 2013. Can the juicy payouts continue in this kind of powerless environment? The good news here is that Wall Street's eyeing a substantially narrower deficit in the year ahead.
OmniVision used to be on top of the world. The company was the undisputed champ for image sensors at a time when smartphones and tablets were all beefing up their camera offerings. Then the market got crowded. OmniVision is still growing its revenue in this competitive environment, and next year, profit growth should follow suit.
Arena Pharmaceuticals has had a magical 2012. The stock has more than quadrupled this year, and it's easy to see why. The Food and Drug Administration approved marketing of Arena's weight-loss drug lorcaserin, and this is the first prescription anti-obesity medication to clear the FDA hurdle in 13 years. Naturally, the stock soared on the future potential of what the weight-loss drug can do for the company's financials. It's losing money now. Wall Street sees a much smaller deficit in 2013, but they see a modest profit in 2014 and blowout earnings come 2015.
Questcor is another pharmaceuticals company with a promising drug, but the market hasn't been as kind in this particular case. Despite Questcor's healthy profitability with its Acthar Gel, it came under attack this summer by the widely followed worrywarts at Citron Research. The skepticism has proven warranted lately as insurance companies and pharmacy benefit management specialists have restricted reimbursements of the costly treatment.
However, Questcor has countered the naysayers through stock repurchases and initiating a healthy dividend rate. At least Wall Street sees Questcor's net income continuing to grow next year.
Finally, we have Rentech. Synthetic fuels and renewable power are attractive niches for forward-thinking investors, and Rentech has become a popular speculative wager given the company's Rentech-SilvaGas and Rentech-ClearFuels biomass gasification technologies.
After a couple of years of red ink, Rentech turned the corner of profitability two quarters ago. Wall Street sees Rentech building on its newfound positive net income in the year ahead.
Cross those fingers, but know the fundamentals
Investors in these five stocks have a right to be excited. They are all improving their financial situations. They are worthy of the gains that the market rally has bestowed upon them over the past year.
I wouldn't be uncomfortable owning any of these companies. They're doing the right thing, regardless of Mr. Market's mood swings.
The expectations may be high, but these five stocks wouldn't have it any other way.
More expert advice from The Motley Fool
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Editor's note: A previous version of this article referenced OCZ Technology instead of OmniVision. The Fool regrets the error.
The article 5 More Reasons Not to Worry About Next Year originally appeared on Fool.com.
Longtime Fool contributor Rick Aristotle Munarriz has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. 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.
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