7 Reasons to Worry About Next Week
Earnings season is here, and it's time to get worried.
There are way too many economists concerned that the global recovery is starting to derail, and it's hard to argue that the United States can buck the trend when consumer confidence is sinking and our unemployment rate remains stubbornly high.
If you want bad news that's a bit more tangible, hear what corporate America has to say next week.
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
|Bank of America (NYS: BAC)||$0.20||$0.27||Add|
|Cree (NAS: CREE)||$0.26||$0.60||Add|
|Infinera (NAS: INFN)||($0.11)||$0.18||Add|
|Johnson & Johnson (NYS: JNJ)||$1.21||$1.23||Add|
|Freeport-McMoRan (NYS: FCX)||$1.14||$1.25||Add|
|Yahoo! (NAS: YHOO)||$0.17||$0.29||Add|
|SanDisk (NAS: SNDK)||$1.07||$1.30||Add|
Source: Thomson Reuters.
Clearing the table
Let's start at the top with Bank of America.
The "too big to fail" banking giant is failing on the bottom line. A cynic would argue that Bank of America is instituting the unpopular $5 a month charge to debit card holders swiping the plastic for purchases after the quarter ended because profitability is going the wrong way, but that's not fair. The margin-tightening regulations that led to this move also didn't kick in until this month.
Cree is a popular stock around Fooldom, though revenue growth has been negative in its two most recent quarters, and margins have also been contracting. The long-term prospects for LED are undeniable, but it's no fun when the global economy is teetering.
Infinera's trade is optical networking, another niche with a great future but an iffy present in this iffy economic climate. Infinera mustered a profit a year earlier, but this time the pros are braced for a deficit. It won't be a shock. Infinera has posted deficits in its two most recent quarters.
Johnson & Johnson straddles dual realms of pharmaceuticals and consumer goods. These used to be two "all-weather" specialties, but the past few years have been more than a little storm for some of the larger drugmakers.
It's not really surprising to see Freeport-McMoRan slipping. Copper prices have been sliding in recent months, as even the once-red-hot China is showing softening demand.
Yahoo! is exploring strategic alternatives, and Tuesday's report is a big reason for that search. Yahoo! figured that outsourcing its search business, selling off secondary endeavors, and focusing on display advertising would be the ticket back to darling status. Well, that hasn't really materialized, and now CEO Carol Bartz is ex-CEO Carol Bartz.
SanDisk is the leader in flash memory products. Crack open your digital camera and there's a decent chance that a SanDisk SD memory card is there storing all of your snapshots. Unfortunately, this is also a competitive market.
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.
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 comments box below.
At the time this article was published The Motley Fool owns shares of Johnson & Johnson, Yahoo!, Infinera, Bank of America, and Freeport-McMoRan Copper & Gold.Motley Fool newsletter serviceshave recommended buying shares of Yahoo!, Johnson & Johnson, and Infinera.Motley Fool newsletter serviceshave recommended creating a diagonal call position in Johnson & Johnson. 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 contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story, except for Freeport-McMoRan. Rick is also part of theRule Breakersnewsletter 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.