The economy is a lot like Jeremy Lin. It can play a pretty good game for a couple of weeks, but then it has a stinker like Lin's 1-for-11 shooting performance against the Miami Heat last night.
Sure, there may be encouraging signs out there, but then you bump into a real estate developer bellwether that hits the market with a surprising quarterly deficit.
There are more than a few companies that aren't pulling their own weight in this supposed economic recovery.
There are still plenty of names posting lower earnings than they did a year ago. Let's go over a few of the companies that are expected to go the wrong way on the bottom line next week.
Latest Quarter EPS (estimated)
Year-Ago Quarter EPS
|Career Education (Nasdaq: CECO )||$0.26||$0.81||Add|
|SINA (Nasdaq: SINA )||$0.21||$0.46||Add|
|Office Depot (NYSE: ODP )||$0.00||$0.09||Add|
|Yingli Green Energy (NYSE: YGE )||($0.35)||$0.52||Add|
|Country Style Cooking (NYSE: CCSC )||$0.07||$0.08||Add|
Source: Thomson Reuters.
Clearing the table
Let's start at the top with Career Education.
Class action lawsuit specialists have been hovering over the for-profit postsecondary educator in recent weeks, hoping to take on company executives for not living up to their fiduciary duties. More importantly, enrollment is starting to slip for many of the leading operators. The government is growing weary of the industry's ineffectiveness, the crummy student loan repayment rates, and the tuition breaks that are provided.
It's not a surprise to see Career Education pegged to post a dip in profitability, but will it really earn less than a third of what it did a year earlier?
SINA is one of China's largest Internet companies. It's the company behind Weibo, the fast-growing microblogging platform that some are calling the Twitter of China. Barclays Capital's Alicia Yap downgraded the former dot-com darling yesterday, lowering her price target from $103 to $70.
Office Depot is one of the country's largest retailers of office supplies. It's naturally not a good sign for corporate America to see Office Depot on this list. If the office superstore chain is slipping on the bottom line, it may mean that companies just aren't spending enough to update their workspaces.
If it's any consolation, know that Office Depot's larger rival -- the one with the "easy" button -- is actually expected to post marginal bottom-line improvement a day after Office Depot's Tuesday report.
Yingli Green Energy is projected to post the sharpest reversal among the five names on this list. The popularity of solar energy rises and sets, like -- well -- the sun. After several profitable quarters, analysts see Yingli posting its second consecutive quarterly loss.
Finally we have Country Style Cooking. The China-based chain of quick-service restaurants has been a disappointment for investors -- like me -- who figured Country Style Cooking was the perfect play on the widening middle class in China.
It's been a disaster. Country Style Cooking has missed Wall Street's quarterly profit forecasts every single quarter since going public in late 2010. Analysts see net income of $0.07 a share, just shy of the $0.08 a share it recorded a year earlier. Until Country Style Cooking proves otherwise, the smart money may be on it coming up short again.
The problem hasn't been a lack of growth at Country Style Cooking. The concept is expanding quickly, and sales are holding up nicely. The company has simply had a problem managing its expenses. There are only so many more chances that Country Style Cooking has to get it right by stateside trading standards and expectations.
Why the long face, short-seller?
These companies have seen better days. The market has rewarded many of these stocks with reasonable gains over the past year, but they still haven't earned those upticks. Lower earnings translates into higher earnings multiples, and nobody wants to see that happen.
The good news here is that Wall Street already expects these companies to deliver shrinking bottom lines. In other words, the bad news is already baked into the shares.
The more I think about it, the less worried I become.
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