The economy is showing signs of fumbling the recovery.
Earlier this week, Treasury Secretary Timothy Geithner was discussing the flimsy state of things. He argued that the economy has been running slower than anyone would like it to be as the result of weakness in Europe, the spike in oil prices earlier this year, and a slowdown in government spending.
That final point may be political posturing for the incumbent, but the overall cautious tone is undeniable.
It's not just a mess at the macro level. There's also plenty of uninspiring news at the company 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
|Broadcom (Nasdaq: BRCM )
|iRobot (Nasdaq: IRBT )
|Netflix (Nasdaq: NFLX )
|Ford (NYSE: F )
|RadioShack (NYSE: RSH )
Source: Thomson Reuters.
Clearing the table
Let's start at the top with Broadcom.
The provider of semiconductor solutions for wired and wireless communications has been cashing in on the multimedia connectivity revolution in the home and corporate markets. Even though analysts see revenue growing in its latest quarter -- and profitability inching higher for all of 2012 -- the pros see Broadcom's bottom line going the other way when the tech company reports on Tuesday.
Then we have iRobot. Yes, the robotics specialist is cool. When you just happen to be the company that makes those cool dust-sucking Roomba vacuum cleaners and PackBot automatons that help keep troops safe in combat situations by detecting roadside explosives, it's hard not to marvel at the "gee whiz" factor. Unfortunately, after several quarters of stellar growth, analysts see iRobot earning less than a third as much as it did a year earlier.
If there's one bright side to the upcoming reports out of both Broadcom and iRobot next week, it's that both companies have landed ahead of Wall Street's bottom-line targets in each of the four previous quarters.
Netflix is the former dot-com darling that has seen its stock crater over the past year. It's easy to see why. A year ago, the $1.26 a share that the video-streaming service provider earned during the second quarter was its most profitable quarter in company history. Now Netflix is expecting to be barely profitable. Losses overseas are gnawing away at profits of its stateside DVD and streaming businesses.
As a satisfied Ford Flex owner -- and shareholder -- it pains me to see Ford struggling at a time when many of its automaker rivals are on the rise. The pros see Ford sales slipping 4% over the past three months, with margins and profitability taking an even harder hit.
Finally we have RadioShack. Remember when the small-box retailer of consumer electronics thought that moving away from its traditional merchandise and shifting its emphasis to mobile phones seemed like such a brilliant idea? Well, RadioShack's been a disappointment with the wireless-centric model lately.
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 translate 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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