October is off to a bumpy start. The market suffered its steepest drop in months yesterday. This morning's news on the unemployment front isn't very encouraging, either.
Things could get even worse next week.
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
|
|
RPM International (NYSE: RPM )
|
$0.44
|
$0.54
|
|
PepsiCo (NYSE: PEP )
|
$1.02
|
$1.06
|
|
Pepsi Bottling Group (NYSE: PBG )
|
$1.05
|
$1.06
|
|
Mosaic (NYSE: MOS )
|
$0.35
|
$2.65
|
|
Alcoa (NYSE: AA )
|
($0.12)
|
$0.37
|
|
Costco (Nasdaq: COST )
|
$0.76
|
$0.92
|
|
Infosys (Nasdaq: INFY )
|
$0.50
|
$0.56
|
Source: Yahoo! Finance.
Clearing the table
Several companies will post lower earnings next week, but these are just a few of the names that really jump out at me.
Let's start with RPM. The coatings and sealants specialist is heading for a fall with Monday's fiscal first-quarter report. The stock was an active recommendation for Motley Fool Income Investor subscribers until earlier this year. A CFO shakeup, the overhang of asbestos litigation, and concerns over the industry's prospects in an iffy economy prompted the newsletter service to give RPM the boot.
PepsiCo is the soft-drink and salty-snacks giant, and Pepsi Bottling Group is its largest bottler. Analysts see only marginal dips in profitability at both companies, but the drop is still a surprise. Recessions were made for couch potatoes cracking open cans of Diet Pepsi and bags of Frito-Lay chips.
Mosaic's realm of potash and phosphates was all the rave when investors felt that global agricultural needs would supersede a recessionary breakdown. The prospects aren't as bright right now, but did you really think that Mosaic would earn just an eighth of what it rang up a year earlier?
Alcoa is the aluminum behemoth. Sure, no one expects an industrial metal such as aluminum to be a big winner these days, but analysts are braced for a quarterly deficit at Alcoa next week.
Costco may be the biggest surprise here. When money's tight, consumers should be trekking to warehouse clubs to score decent savings by buying in bulk. Well, it's just not happening at Costco, if we go by what the pros expect out of the retailer's bottom line.
Infosys is one of India's leading providers of IT-based outsourcing. When you call a product's customer-support number in the middle of the night and find someone from Bangalore on the other end, you may be experiencing Infosys at work. Overseas call-center outsourcing is one way for companies to save money, but Infosys is still looking to post a year-over-year dip in net income next Friday.
Why the long face, short-seller?
These reports aren't likely to be pretty. Many of these stocks are market darlings in seemingly healthy sectors, to boot. A warehouse club without long checkout lines? A soft-drink giant that's flat after losing its fizz? This isn't going to be an attractive quarter, no matter how much you like gnawing on those PepsiCo Frito chips.
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, so the door is open for unexpected surprises.
The more I think about it, the less worried I become.
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