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The economy is showing signs of fumbling the recovery.
The U.S. Census Bureau revealed earlier this week that median household net worth declined 35% from 2005 to 2010. Really? Sure, most of that slide was the result of cascading home equity. A lackluster stock market also didn't help.
It's not just iffy news at the macro level.
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
|Apollo Group (Nasdaq: APOL )||$0.97||$1.45||Add|
|AeroVironment (Nasdaq: AVAV )||$0.71||$0.79||Add|
|H&R Block (NYSE: HRB )||$2.05||$2.14||Add|
|American Greetings (NYSE: AM )||$0.69||$0.78||Add|
|Worthington Industries (NYSE: WOR )||$0.53||$0.64||Add|
Source: Thomson Reuters.
Clearing the table
Let's start at the top with Apollo Group.
The online educator behind the University of Phoenix campus was a market darling several years ago. Investors soured on the company after it was called out for its aggressive marketing tactics, and then came the industrywide problem of iffy graduation rates and lousy student loan repayment rates.
The air of uncertainty has taken its toll on an industry that was initially one of the biggest winners when the recession started and displaced workers were seeking to improve their skills though Web-based educators.
University of Phoenix degreed enrollment clocked in at 355,800 students in Apollo Group's previous quarter, 12% below where it was a year earlier. Given the scalable nature of offering online curriculums, it isn't a surprise to see profitability falling hard on even the slightest downtick in revenue.
The pros see Apollo's quarterly profitability shrinking by a third when it reports on Monday with revenue sliding by nearly 10%.
AeroVironment makes unmanned aircraft vehicles. These are the small high-tech flying machines that help the military go on recon missions and assist meteorologists in gauging severe weather. The vehicles aren't cheap, but it's certainly not as expensive as putting human lives at risk in pursuit of information.
Even if one concedes that government expenditures will be on the way down, it would seem that alternative defense gear provided by AeroVironment would still be in heavy demand.
H&R Block is the ubiquitous tax preparer. This is supposed to be the company's meaty quarter, covering the mid-April filing deadline. However, with more taxpayers gravitating to free or nearly free programs it probably isn't a surprise to see H&R Block unable to make as much money as it did a year earlier.
American Greetings is another company that's easy to see on this list. Greeting cards and stationery items seem so outdated when a social network can load up with birthday greetings and virtual congratulations.
Finally, we have Worthington Industries. The value-added steel processor is a specialist in manufactured pressure cylinders. The Ohio-based company is expected to earn $0.53 a share when it reports on Thursday, well short of the $0.64 a share it rang up a year earlier.
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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