For the most part, the market has been rocking since March. The economy hasn't exactly bounced back, but investors still feel confident bidding up the shares of most public companies.
Doing so could be a huge mistake.
Not every company is worthy of its upticks. If you don't believe me, check out some of the earnings reports that are likely to go the wrong way over the next few days.
Let's go over a few of the blue chips and seemingly recession-proof companies for which analysts see the arrows pointing down on the bottom line next week. Some of the names may surprise you.
|
Company
|
Latest Quarter's EPS (Estimated)
|
Year-Ago Quarter's EPS
|
|
Big Lots (NYSE: BIG )
|
$0.30
|
$0.32
|
|
Burger King (NYSE: BKC )
|
$0.33
|
$0.37
|
|
Noah Education (NYSE: NED )
|
$0.02
|
$0.10
|
|
Hain Celestial (Nasdaq: HAIN )
|
$0.30
|
$0.34
|
|
TiVo (Nasdaq: TIVO )
|
($0.05)
|
$0.03
|
|
American Eagle (NYSE: AEO )
|
$0.14
|
$0.29
|
|
Conn's (Nasdaq: CONN )
|
$0.33
|
$0.45
|
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 start with Big Lots. This is presumably a great time for thrift-focused retailers. Even Dollar General wants in on the fun, since it filed to go public yesterday. Unfortunately, even the allure of closeouts, overstocks, and clearance wares isn't going to be enough to deliver earnings growth at Big Lots, according to Wall Street.
Burger King? I thought the crummy economy was a blessing to a fast-food chain selling Whopper Jr. sandwiches for a buck. Popularity isn't a problem at the BK lounge: Worldwide comps have inched higher for 21 consecutive quarters, and the burger buddy has been growing its reach over the past year. The bottom line is an entirely different animal, though. Anything from higher wages to a bump in commodity prices can turn that freaky mascot's grin upside down.
Noah Education has a few things going for it. The company is an interactive learning specialist, and online educators have been thriving in recent years. It's also in China. Still, next week doesn't promise to be kind to Noah.
Hain Celestial is a leader in organic foodstuffs. The company behind Terra snack chips, Soy Dreams soy milk, and Celestial Seasonings teas has been holding up better than you might think. The pricey organic supermarkets may be struggling, but Hain Celestial has been growing its reach into mainstream grocers. It's not going to have gained enough ground to make a difference, though.
TiVo has been in a good groove lately. It has come up big by protecting its patents in court. It turned a profit in three of last year's four quarters. And it has also surprised the market by topping analyst expectations in each of the past seven quarters. All the same, the black ink will presumably turn to red next week.
American Eagle Outfitters is proof that even a trendy retail concept and a sparkling balance sheet aren't enough. Then again, comps have fallen by a sharp 10% through the first half of its fiscal year. Malls haven't been pretty places for investors, save for a few outliers.
The pros at Conn's? Life should be easier after Circuit City, the country's second-largest consumer electronics chain, was liquidated earlier this year. It seems as if everyone is gaining market share as a result of Circuit City's demise. Conn's claims to have gained a sliver in its latest quarter, with comps off by 5% compared to a 12% decline in industrywide sales of consumer electronics and home appliances nationally. That's only a relative victory, though, given the negative comps.
Why the long face, short seller?
Many of these stocks are market darlings in seemingly healthy sectors. Chinese growth stocks are buckling? Burger chains are backpedaling? You won't want to set your TiVo to watch this quarter again if you're a fan of these companies.
There is a silver lining, though. 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. We could see some 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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