I'm an optimist by nature.
Sure, I don't mind calling a company out here and there, but largely I like to reflect on the positive. Earlier I singled out five companies that are expected to post a dip in profitability in 2012. I did mention that public companies projected to go the wrong way this year are in the minority.
The truth is that analysts are generally upbeat about the way they see earnings going in corporate America through 2012. Obviously, revisions will be made if the economy veers off its gradual recovery path. Individual companies will also implode along the way. However, by and large, it's a safe bet that most of the companies in your portfolio are targeted to improve on the bottom line this year.
Let me counter the five reasons to worry that I posted earlier with five encouraging companies that Wall Street sees delivering either chunkier profits or narrower deficits this year.
2011 EPS (estimated)
2012 EPS (estimated)
|Novavax (Nasdaq: NVAX )||($0.19)||($0.17)||Add|
|DryShips (Nasdaq: DRYS )||$0.43||$0.58||Add|
|Sirius XM Radio (Nasdaq: SIRI )||$0.06||$0.07||Add|
|SodaStream (Nasdaq: SODA )||1.16 euros||1.46 euros||Add|
|Molycorp (NYSE: MCP )||$1.56||$2.96||Add|
Source: Thomson Reuters.
Clearing the table
Let's start at the top with Novavax.
The clinical-stage biopharmaceuticals company is already off to a good start in 2012. Earlier this week it announced that its joint venture in India was making great strides with its vaccine-development program. Novavax now expects to start clinical studies of vaccine candidates to prevent influenza and rabies either this year or by 2013. This obviously isn't the kind of news that will pay off right away. Analysts simply see Novavax posting a smaller deficit this year than it did in 2011. However, the pros also see the Maryland-based company breaking even next year.
DryShips is a dry bulk carrier. It also happens to hail from Greece. Its industry is presently out of favor, and we don't even need to get into Greece's iffy economic state at the moment at the heart of the sovereign debt crisis. However, analysts do see DryShips building on last year's profitability. Sure, this is still less than the $1.13 a share that it earned in 2010, but those with the stomach for risk will love the dirt cheap P/E multiple here.
Sirius XM had some good news to share last night. The satellite radio giant tacked on 1.7 million net new subscribers in 2011, leaving it with 21.9 million members by year's end. Sirius XM had earlier projected to bring in just 1.6 million more new accounts than those canceling, but a strong holiday push helped fortify the premium radio pioneer.
Yes, Sirius XM is profitable. The satellite radio star has been in the black for well over a year now. Going from a projected $0.06 a share in 2011 to $0.07 a share in 2012 may not seem like a lot, but things should pick up from here as analysts have long-term net income targets of $0.10 a share in 2013 and $0.18 a share come 2014.
SodaStream is racing higher today after striking a deal with Kraft that will find the food giant offering up its Country Time lemonade and Crystal Light fruit drink flavors as options for owners of SodaStream's home-beverage system. Analysts offer up their earnings estimates for the Israeli-based company in euros -- so don't make the mistake of assuming that SodaStream has a higher earnings multiple than it really does. Put away your currency translators, though. The key takeaway here is that the pros believe that SodaStream's profitability will rise by 26% this year. That's fizzy growth in any denomination.
Finally, we have Molycorp. The market battered rare-earth mineral miners just last week when China increased its export quota by 3% on the scarce yet essential elements that find their way into many popular consumer electronics. This may lead to analysts scaling back Molycorp's growth prospects in the near term, though it's still likely looking at explosive bottom-line growth this new year.
Cross those fingers, but know the fundamentals
Investors in these stocks have a right to be excited. They are all improving their financial situations. They are worthy of the gains that the market has either bestowed on them -- or will bestow on them once they come through with their healthy growth spurts.
I wouldn't be uncomfortable owning any of these companies. They're doing the right thing, regardless of Mr. Market's mood swings.
The expectations may be high, but these stocks wouldn't have it any other way.