7 Reasons to Worry About Next Week
Summer's finally on the way out, but volatility appears to be here to stay.
Results from a Bloomberg National Poll released this week finds that 72% of the respondents feel that the country is on the wrong course, and that's an attack on both political parties.
It doesn't get a whole lot better in corporate America.
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
ConAgra (NYS: CAG)
Lennar (NYS: LEN)
KB Home (NYS: KBH)
Analogic (NAS: ALOG)
General Mills (NYS: GIS)
Vail Resorts (NYS: MTN)
Accuray (NAS: ARAY)
Source: Thomson Reuters.
Clearing the table
Let's start at the top with ConAgra. It's hard to stroll through a supermarket aisle without running into the food giant's brands. ConAgra properties include Hebrew National hot dogs, Healthy Choice entrees, and Slim Jim beef jerky sticks. Everyone has to eat, but are folks just consuming fewer ConAgra products? Not necessarily. Analysts actually see ConAgra's quarterly revenue climbing 5%. The projected shortfall here is a matter of contracting margins.
Lennar and KB Home are homebuilders. Obviously, this is a crummy place to be these days. Property values continue to inch lower, and there's still a glut of existing homes to sell. If there's a silver lining here for Lennar, at least it's that it is still profitable. Despite the real estate developer malaise, Lennar is headed for its sixth consecutive quarter of positive net income.
Analogic makes imaging systems that are used in both the medical and homeland security markets. This is the kind of specialty that would seem to be in demand these days, at least on the defense front, but Mr. Market doesn't see it that way. Over the past week alone, analysts have gone from targeting a profit of $0.52 a share out of Analogic -- which still would have fallen short of last year's $0.56 a share in earnings -- to eyeing net income of only $0.45 a share.
General Mills seems to have lost its Lucky Charms. As another supermarket juggernaut, General Mills isn't just about cereals. This is also the food giant behind Nature Valley granola bars, Totino's frozen pizzas, and Yoplait yogurts. The pros see the same margin contraction as ConAgra, since they're forecasting revenue to climb slightly this quarter.
Vail Resorts isn't supposed to turn a profit this time of year. Despite the owner of several Colorado ski resorts trying to market its properties as summer getaways for hikers and golfers, this will always be a company that earns its keep once the snow begins to fall and the ski lift begins to elevate skiers and snowboarders. However, it's still problematic to see deficits widening here.
Finally we have radiation oncology specialist Accuray. Normally, analysts expecting profitability to slip by just a token $0.01 a share is a great opportunity for a company to crank out a positive surprise, but Accuray has actually missed Wall Street's conservative targets in two of the past three quarters.
Why the long face, short-seller?
These seven 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 Motley Fool newsletter services have recommended buying shares of Vail Resorts. 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. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.