The economy is showing signs of fumbling the recovery.
Sure, stocks closed at a multiyear high yesterday and the European Central Bank appears to be finally making headway into tackling the euro's woes, but have things really been all that great?
Consumer confidence hit a nine-month low in August, and the political jockeying these past two weeks indicate that things will get heated as we stumble our way toward November's vote.
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
|Casey's General Stores (Nasdaq: CASY )
|Majesco Entertainment (Nasdaq: COOL )
|Hanwha SolarOne (Nasdaq: HSOL )
|Peerless Manufacturing (Nasdaq: PMFG )
|Five Below (Nasdaq: FIVE )
Source: Thomson Reuters.
Clearing the table
Let's start at the top; Casey's at bat.
Casey's General Stores runs a chain of convenience stores. This may seem to be a steady all-weather business, but Wall Street hasn't had an easy time getting a good read on the retailer. If you think that Casey's may actually earn less than the $0.95 a share that analysts are targeting, recent history would be there to back you up. Casey's has come up short against bottom-line expectations in three of the past four quarters.
Majesco seemed to be the next hot video game publisher a few quarters ago. It had a hit a few years ago with its Cooking Mama line of games, and then it became a leader in the workout category with its Zumba Fitness titles.
Majesco may have been profitable in five of the last six quarters, but the market's bracing for a quarterly deficit when Majesco reports on Monday.
It isn't a surprise to see Hanwha SolarOne on this list. The Qidong-based provider of solar energy equipment is in an industry that's out of favor. The hot demand in China and Europe to go solar has cooled along with their respective economies, and Hanwha is just another player that's trying to make the most of a bad situation until sentiment for solar shines again.
Peerless Manufacturing is another company going the wrong way at the end of its income statement. The company provides the energy industry with gear, but this doesn't seem to be a great place to be right now. Wall Street's banking on Peerless earning half as much as it did a year earlier.
Finally, we have Five Below. True to its name, the discounter's stores offer a wide variety of merchandise that's all priced at $5 or less. It's a seasonal business, and naturally the company makes most of its money during the holiday shopping season. However, this fiscal second quarter has historically been its second meatiest reporting period.
A year ago, Five Below cranked out a profit of $2.2 million. This time around -- fresh off its recent IPO -- analysts feel that Five Below will barely break even.
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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