You have nothing to fear but earnings season itself.
Quarterly reports are trickling in, and we've seen a mixed bag of results so far. Next week will be hectic, as several market darlings and trendsetters step up to the earnings stage. And many beloved bellwethers are expected to post lower earnings than they did a year ago.
Let's go over a few of the blue chips and seemingly recession-proof companies that have analysts expecting bottom-line drops next week. Some of the names may surprise you.
|
Company
|
Latest Quarter's EPS (Estimated)
|
Year-Ago Quarter's EPS
|
|
Apple (Nasdaq: AAPL)
|
$1.16
|
$1.19
|
|
Coca-Cola (NYSE: KO)
|
$0.89
|
$1.01
|
|
Yahoo! (Nasdaq: YHOO)
|
$0.08
|
$0.10
|
|
eBay (Nasdaq: EBAY)
|
$0.36
|
$0.43
|
|
Intuitive Surgical (Nasdaq: ISRG)
|
$1.26
|
$1.28
|
|
Amazon.com (Nasdaq: AMZN)
|
$0.31
|
$0.37
|
|
Microsoft (Nasdaq: MSFT)
|
$0.36
|
$0.46
|
Source: Yahoo! Finance.
Clearing the table
There will be several companies posting lower earnings next week, but these are just a few of the names that really jump out at me.
Let's star with Apple. Yes, Apple! You probably thought, as I did, that iPhones, iPods, and MacBooks were selling like black mock turtlenecks at a Steve Jobs costume party. Well, iPhones certainly are moving briskly, but it wouldn't be a shock to see iPod and MacBook sales falter. The proliferation of media-streaming smartphones makes it redundant to tote around a second gadget as a portable media player. Netbooks and cheap laptops continue to have an edge over costlier Macs in these penny-pinching days.
Coca-Cola is supposed to be the ultimate all-weather warrior, as the pop star promises fizzy refreshment for mere pocket change. Are we scaling back on consumption? Has the global expansion strategy shifted into reverse? Are operations outside its core carbonated-drink business blurring the beverage giant's focus? Coke is usually the one with all of the answers. Next week, it'll be facing a lot of questions.
Yahoo! has been a dot-com laggard for years, but wasn't the new CEO supposed to shake things up? Carol Bartz definitely will, but give her some room. She's been there only since January. In the meantime, Yahoo! is just another sluggish media company, struggling with the advertising market's slowdown.
You may not be expecting great things at eBay, given the tenuous state of affairs between the namesake site and the policy changes that have steamed many of its sellers. However, eBay has continued to get bailed out by real growth at PayPal and Skype. One would also expect a recession to play right into eBay's hands, as cash-starved users dust off their wares through virtual garage sales. Some analysts are even starting to believe that the recent shortcomings at eBay.com itself are bottoming out. Well, not quite yet, apparently.
Intuitive Surgical is revolutionizing the operating room, with its robotic arms that make surgical procedures more efficient and keep surgeons fresh. However, it sold fewer systems during its most recent quarter than it did a year earlier. The pressure is on Intuitive Surgical to get back on the growth path. Analysts don't see that happening next week.
Even as conventional retailers were bellyaching over the holidays, Amazon.com was on a roll. Earnings rose, fueled by an 18% surge in net sales during a brutal economic haze. The party continues on the top line. Wall Street sees net sales inching 15% higher for next week's second-quarter report. Unfortunately, the market mavens think margin contraction is going to cost the company on the bottom line.
Finally, we get to Microsoft. Bing is a hit. Xbox 360s are popular. Vista is now months away from handing over the operating-system keys to Windows 7. Yet all of that good news isn't going to be enough, it seems, to spare Microsoft a 22% slide in profitability.
Why the long face, short seller?
Scared ya, didn't I? If rock stars like Apple and Amazon are slipping, how can the past few months of market rallies be justified? And doesn't Coca-Cola always grow?
Well, calm down. Keep in mind that investors are already braced for the worst with these reports. If there is an upside to this grim list, it's that lower profitability is already baked into next week's reports. If anything, that reality opens the door for unexpected surprises.
The more I think about it, the less worried I become.
Some other reads to get you through the weekend:
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