There is more pain than gain expected in next week's earnings reports. A lot of the companies delivering their quarterly results are expected to post year-over-year declines in profitability.
Does it worry you? Probably not. You may not even own any of the stocks taking a step back on the bottom line next week. However, the past few months of market rallies have heightened expectations over the state of equities.
In short, stock gains may be making promises that the fundamentals can't keep. Let's go over a few of the blue chips and seemingly recession-proof companies where analysts see the arrows pointing down on the bottom line next week. Some of the names may surprise you.
|
Company
|
Latest Quarter EPS (Estimated)
|
Year-Ago Quarter EPS
|
|
Pall (NYSE: PLL)
|
$0.42
|
$0.54
|
|
GigaMedia (Nasdaq: GIGM)
|
$0.09
|
$0.20
|
|
Shuffle Master (Nasdaq: SHFL)
|
$0.04
|
$0.09
|
|
Men's Wearhouse (NYSE: MW)
|
($0.01)
|
$0.20
|
|
Del Monte (NYSE: DLM)
|
$0.26
|
$0.29
|
|
lululemon athletica (Nasdaq: LULU)
|
$0.08
|
$0.12
|
|
National Semiconductor (NYSE: NSM)
|
($0.42)
|
$0.34
|
Source: Yahoo! Finance.
Clearing the table
There will likely be many more companies posting lower earnings next week, but these are just a few of the names that really jump out at me.
Pall is a filtration, separation, and purification specialist. The reason Pall is a surprising pick for this list is that the company hiked its dividend earlier this year, typically a sign of internal confidence in future growth.
GigaMedia is an online gaming company in Asia, but we're not talking about the Web-based multi-player fantasy games that are all the rage with Chinese youth. The company's strengths are in online poker and casino software, serving as a global gateway for more than $4 billion in real-money transactions. Gambling hasn't been as recession-proof as many once figured.
Shuffle Master should know. The company is a leader in casino equipment. Beyond its namesake card shufflers, it's a player in table games and electronic gear. With many states suffering budgetary shortfalls, one would think that many would seek to widen the reach of legalized gambling. Well, it apparently isn't happening at a pace that will benefit Shuffle Master's report next week.
Men's Wearhouse is another name that I figured would hold up well in an economic downturn. Don't look at me funny. The chain has a reputation for providing attractively priced suits, and with all the white-collar layoffs lately, job seekers are crying for new suits as they hit the interview trail.
Del Monte is a supermarket staple. A stroll through the aisles of your local grocer will find you eyeing many of its products, like Contadina Italian eats and Meow Mix cat food. This used to be an "all-weather" industry, but brand giants have been challenged as penny-pinching consumers turn to cheaper store brands.
Two years ago, lululemon athletica was one of the hottest specialty retail concepts. Its high-end yoga wear was a hit with well-to-do soccer moms in upscale suburban malls. Consumer restraint has weighed on many retail chains selling full-priced fashions, but it's disheartening to see a rising star fall so quickly.
National Semiconductor is a 50-year-old integrated-circuits powerhouse. Tech stocks have been bouncing back, and National Semi's emphasis on semiconductors for personal mobile devices and energy applications seems like a good way to go. But it won't work this time around. Analysts see red ink.
Why the long face, short seller?
These aren't quarterly reports that I'm looking forward to, but why isn't the market coated in dread? Well, since we're talking about analyst estimates here, the bad news has already been baked into the stock prices. The real surprise here would be healthy reports.
It could happen. It wouldn't take much of a positive surprise for a company like Del Monte or Pall to post year-over-year improvement next week.
The more I think about it, the less worried I become.
Some Foolish reading for the weekend:
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