The economy is showing signs of fumbling the recovery.
Sure, we're finally starting to see home prices inch higher. Jobless claims are heading lower, and yesterday the country reported its smallest trade deficit in 18 months.
However, Europe's still a mess, and the other global economies don't seem to be doing a whole lot better.
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
|Sysco (NYSE: SYY )||$0.54||$0.57||Add|
|JDS Uniphase (Nasdaq: JDSU )||$0.12||$0.23||Add|
|SINA (Nasdaq: SINA )||($0.02)||$0.20||Add|
|Dangdang (NYSE: DANG )||($0.23)||($0.06)||Add|
|GameStop (NYSE: GME )||$0.15||$0.22||Add|
Source: Thomson Reuters.
Clearing the table
Let's start at the top with Sysco.
The country's leading food-service company makes sure that restaurants, commissaries, and other institutions have food to serve their hungry patrons. This has historically been a steady grower, giving Sysco the flexibility to boost its dividend 43 times since going public 42 years ago.
It's that envious streak of payout hikes that should make investors nervous now that Wall Street's eyeing a slight decline in profitability. If this trend continues, it will eventually be a challenge to keep distribution rates growing.
JDS Uniphase toils away in the volatile optical networking arena. It has had its moments of stellar growth, but this isn't its finest hour. Analysts see the company earning just a little more than half as much as it earned a year earlier. This would be the company's fourth consecutive quarter posting year-over-year declines on the bottom line.
SINA watches over the popular SINA Weibo website. It's China's equivalent of Twitter, though the micro-blogging nature of the platform makes it a close match to Tumblr, too.
SINA's still posting revenue growth. The problem here is that investments in SINA Weibo before truly breaking out the monetization possibilities have been crushing margins at the company in recent quarters. It will be back as a dot-com darling eventually, but patient shareholders will have to wait through the bottom-line sacrifices for now.
E-Commerce China Dangdang is another Chinese Internet company that has never had a problem growing its top line. The online retailer is expected to post a 52% surge in net sales when it reports next Thursday. The problem here is that e-tail is still in its infancy in China. Remember when the first wave of stateside Web-based retailers would post long streaks of quarterly deficits?
It's not getting any prettier for Dangdang, as analysts believe that dot-com disappointment will post a much wider loss than it did a year ago.
Finally we have GameStop. Video game sales have been slipping for three years, so it's not really a surprise to see the leading standalone retail chain buckle under pressure. GameStop may have had a thriving used-game business to help offset the initial recessionary sting, but now that video games are moving away from physical distribution, GameStop is scrambling to achieve a healthy presence in digital distribution.
GameStop is taking healthy strides in that direction, but it's apparently not enough to offset the store-level decay.
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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