When a company forecasts lower sales or profits, its stock usually takes a hit. It's not always easy to tell whether your company is having a fire sale or burning down. Maybe it is time to get out -- or maybe it's time to buy more!
To help tell the difference, we pair up the dour guidance news with the sentiments of more than 180,000 members of Motley Fool CAPS. If the best stock pickers think the companies still have the power to turn lemons into lemonade, maybe investors should take notice.
Here are two stocks that have recently announced reduced guidance.
CAPS Rating (out of 5)
Previous or Consensus Estimate
|Carnival (NYSE: CCL )||*||$0.21||$0.05-$0.09||Q2 2012|
|Peabody Energy (NYSE: BTU )||**||$0.50-$0.75||Low end of prior guidance||Q1 2012|
Don't blindly sell into their bearish outlook -- you still need to do some research. Use the announcement as a jumping-off point for additional research.
Disaster of Titanic proportions?
After what some are calling a shocking display of ineptitude and even cowardice on the part of the showboating captain of the cruise ship Costa Concordia, it's not surprising that ship operator Carnival is seeing its fortunes sink, too. The Concordia struck submerged rocks off Italy's coast, killing 32 people while the captain made it safely ashore ahead of other survivors, having "accidentally fallen" into one of the lifeboats. A separate vessel, the Costa Allegra, drifted in pirate-infested waters in the Indian Ocean without power for three days following a fire. It was safely brought to shore without incident.
Carnival needs a lifeboat these days, as bookings fell in the wake of the disaster, but Europe's financial unraveling also played a role in the slashed earnings guidance, as those programs were the worst performers. It also doesn't help that energy costs are soaring, too, as year-over-year increased fuel costs will swipe $0.11 from first-quarter results and $0.40 for the entire year.
Disasters and potential disasters can strike any cruise operator -- Royal Cruise Lines' (NYSE: RCL ) Azamara Quest was also recently hit with an engine fire but was able to limp into port -- and despite some high-profile and tragic outcomes, the industry's overall safety record remains outstanding. The reticence being shown by cruisers to book will probably fade.
There are 14 ships due to be delivered this year, with another 11 due by 2015, and industry executives are not worried about being able to fill them. Disney, also a big cruise-ship operator, recently launched its fourth boat. With U.S. passengers accounting for two-thirds of the 16 million global cruise passengers that sailed in 2011 and a more upbeat outlook from them, I'm guessing Carnival's diminished horizons are only temporary. But its stock still carries a greater premium than rival Royal, which, when also comparing their growth prospects, looks like the better bet of the two.
CAPS All-Star member thinks Carnival's dividend will keep it afloat, though performance is likely to be choppy, but tell me in the comments section below or on the Carnival CAPS page whether you think it can sail the high seas sooner rather than later.
A super opportunity
Two years ago, coal producer Peabody Energy was banking on seeing the industry in the midst of a huge supercycle. Instead, it faces intense regulatory scrutiny, plummeting prices, and slack demand for metallurgical coal. Weakness in the competing natural gas sector, where inventories remain well above five-year averages and prices at multiyear lows, has also been a big factor. Analysts are looking at coal demand in China to be soft, too, as production outpaces demand. According to the Energy Information Administration, coal consumption will drop this year to levels not seen since 1996.
Despite appearances to the contrary, Peabody is at an inflection point that will also see Arch Coal, Patriot Coal (NYSE: PCX ) , and Walter Energy (NYSE: WLT ) -- all of which also posted disappointing results recently -- rebound.
The supercycle is still intact, says Peabody, as rising electricity generation and steel demand in China and India, coupled with constrained global coal supplies, will allow Peabody, as the largest U.S. coal producer, to overcome what was weakness based on Australian weather. Shares are down more than 60% from their 52-week highs, but I'm betting it won't be running into any more buzzsaws and will recover from here, a point echoed by CAPS member MHenage: "Crazy cheap, stock sells for about 10 times forward earnings, this is half the P/E of the last 3 years. Company is the world's largest private-sector coal company, and is uniquely positioned to capture the global growth in coal use."
Add Peabody to the Fool's free portfolio tracker to see whether the supercycle finally appears or whether this investment simply becomes a super disappointment.
Looking under rocks
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