The market's been rocking and rolling through most of the past two months. I don't mean to be a party pooper, but have you noticed that many of the bellwethers have been posting lower earnings lately than they did a year ago?
It's not going to get any better next week, when several blue chips and seemingly recession-proof companies are expected to follow suit with year-over-year declines. Let's go over a few of the companies that analysts predict will post declines in year-over-year profitability. Some of the names may surprise you.
|
Latest Quarter EPS
|
Next Week
|
Last Year
|
|
SYSCO (NYSE: SYY )
|
$0.38
|
$0.40
|
|
Activision Blizzard (Nasdaq: ATVI )
|
$0.04
|
$0.09
|
|
Bankrate (Nasdaq: RATE )
|
$0.33
|
$0.46
|
|
Sara Lee (NYSE: SLE )
|
$0.18
|
$0.22
|
|
Disney (NYSE: DIS )
|
$0.40
|
$0.58
|
|
Pitney Bowes (NYSE: PBI )
|
$0.63
|
$0.66
|
|
CVS (NYSE: CVS )
|
$0.54
|
$0.55
|
Source: Thomson.
Clearing the table
There will likely be hundreds of companies posting lower earnings next week, but these are just a few of the names that really jump out at me.
SYSCO provides food to restaurants and institutions. When there's a recessionary slowdown in casual dining, it's there delivering grub to the fast food chains. When eateries struggle, SYSCO is also serving up foodstuffs through all-weather places like hospitals, schools, and prisons. The company is such a consistent grower that it has hiked its dividend rate every single year since going public in 1970.
Activision Blizzard is the world's leading video game company. Guitar Hero, World of Warcraft, and Call of Duty are just some of its enviable franchises. The video game industry has mostly bucked the recessionary trend, with software sales growing as console makers continue to lower their system prices.
Bankrate may seem like a name that is susceptible given the banking industry's failure, but the online publisher of interest rates has been growing nicely until now. Revenue soared 59% in the company's previous quarter. However, earnings haven't kept up lately. Mr. Market thinks it's going to get worse.
Sara Lee and CVS should be surprising names on the list. Grocery store staples and drugstore chains are typically seen as defensive stocks. If the economy is bad, we still need to eat and pick up pharmacy prescriptions and sundries.
Disney is another shocker. Yes, media companies are struggling. The advertising market is being hammered. However, Disney has pre-teen magnets in its arsenal like Jonas Brothers, Hannah Montana, and the rising star duo of Selena Gomez and Demi Lovato. It also has cable properties like Disney Channel -- and to a lesser extent ESPN -- that aren't as sponsor-dependent as free broadcast channels.
When Pitney Bowes bumped up its yield back in February, shareholders weren't surprised. The metered mail leader has increased its payout in each of the past 27 years. However, clearly corporate America's slowdown is finally catching up to Pitney Bowes, if the market has "return to sender" stamped on next week's earnings report.
Shield your eyes, but do take snapshots
So how confident are you feeling about the market extending its recent rally through next week? If all-weather stocks are buttoning up their raincoats, shouldn't you start unfolding your poncho?
Then again, the market has already baked in a disappointing quarter for many of these companies. Sure, most stocks have been rallying since early March but they are mostly trading lower today than they were a year ago.
Analysts have also underestimated the profit-generating potential of several companies earlier this earnings season. January, February, and March were definitely difficult months for companies, but many of them saw this coming and began to scale back their expenses accordingly.
Am I happy to see so many top stocks poised to take a step back next week? Of course not. Might any potential weakness prove to be overdone, providing investors with perhaps the last great entry points into many of these stocks? I would bet on it.
Some other reads to get you through the weekend:
RSS Headlines
Fool UK