Where do we go from here?
The market's been rallying since March, but these aren't exactly marching orders. There are still way too many companies out there that aren't earning their recent gains.
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
|
|
Lowe's (NYSE: LOW )
|
$0.24
|
$0.33
|
|
Home Depot (NYSE: HD )
|
$0.36
|
$0.45
|
|
SINA (Nasdaq: SINA )
|
$0.31
|
$0.39
|
|
Autodesk (Nasdaq: ADSK )
|
$0.23
|
$0.56
|
|
BJ's Wholesale (NYSE: BJ )
|
$0.45
|
$0.49
|
|
Hot Topic (Nasdaq: HOTT )
|
$0.13
|
$0.17
|
|
GigaMedia (Nasdaq: GIGM )
|
$0.09
|
$0.19
|
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 Lowe's and Home Depot. The country's two largest home improvement chains continue to struggle, even though they are now up against last year's bleak performances. If the economy is turning, one would expect folks to head back to their local hardware store and begin stocking up for the home improvement projects that they have put off over the past two years.
Unfortunately, the old days of cash-out refinancing are toast. With depressed real estate prices, many homeowners can't tap into the evaporating equity in their homes. Gun-shy lenders are also slower with the approval stamps.
SINA is one of China's largest new media companies. Online advertising has been rocky domestically, but shouldn't it be holding up better in the world's most populous nation? China has the world's largest Internet audience, a healthy online migration rate, and a pretty resilient economy compared to the rest of the world. Unfortunately, none of this is showing up on SINA's bottom line.
Autodesk is the architecture software giant. Wasn't a good chunk of the country's stimulus plan earmarked for new construction? We may have a glut of residential and commercial real estate, but emerging markets overseas still have a lot of development to look forward to.
BJ's Wholesale may be the biggest surprise in the list. Warehouse clubs should be thriving in a recession. Beyond the all-weather appeal of selling groceries, BJ's Wholesale sells discounted items in bulk.
Hot Topic should be holding up better than your typical mall chain. The company's edgy apparel and novelty items have gone mainstream with the popularity of the Twilight films. Black clothing and obscure licensed characters and bands are no longer the exclusive garb of emo kids and Goths. Hot Topic had its moment in the sun, but comps have turned negative lately.
GigaMedia makes online poker and casino software. Economic downturns often bring out the gambler in some of us, and GigaMedia's Asian roots make this a global play where web-based wagering is as legal as it is popular. Unfortunately, it's not holding a very hot hand at the moment.
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 that isn't stocking up on the bottom line? A Chinese dot-com that is basking in interactive marketing glory? A mall retailer that was rocking just a year ago? This isn't going to be an attractive quarter, no matter how cool that deck project will turn out once you finally make it out to Home Depot.
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. It actually opens the door for unexpected surprises.
The more I think about it, the less worried I become.
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