The economy is showing signs of fumbling the recovery.
Home sales and housing starts are hitting two-year highs, but will it last? What do you think will happen if Obama raises taxes on well-to-do homeowners or Romney eliminates the mortgage interest rate deduction? No matter where voters turn in November, one fiscal cliff or another may be waiting.
And 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
|Carnival (NYSE: CCL )||$1.44||$1.69||Add|
|Vail Resorts (NYSE: MTN )||($1.56)||($1.49)||Add|
|Micron Technology (NYSE: MU )||($0.22)||($0.14)||Add|
|Nike (NYSE: NKE )||$1.12||$1.36||Add|
|Research In Motion (Nasdaq: RIMM )||($0.47)||$0.80||Add|
Source: Thomson Reuters.
Clearing the table
Let's start at the top with Carnival.
The world's largest cruise line operator has benefited over the years as travelers embrace the joys of hitting the high seas on gargantuan cruise ships. The ability to be able to visit exotic ports of call daily without having to repack suitcases is a big seller. The fact that passengers are enjoying spa treatments, sumptuous buffets, and live theater shows as they sail from one destination to the next makes the journey itself fun for a change.
This would seem to be a thriving industry, especially during the seasonally potent summer when families can hit the open seas without ducking out of school. The climate is also apparently good enough that smaller rival Norwegian Cruise Line filed to go public last summer.
That deal has yet to set sail, though.
Sometimes Carnival's bottom-line performance doesn't match where its top line is heading. A spike or drop in fuel prices can hurt or help margins. However, Wall Street's also banking on a 7% decline in Carnival's top line this quarter.
At the other end of the seasonality spectrum we have Vail Resorts. The ski resort operator is naturally going to peak when its slopes are covered with snow. The company has tried to position its resorts as ideal summer getaways with hiking trails, golf courses, and horseback riding. Outside of the dreadful springtime mud season, Vail's properties can be pretty spectacular in the summer.
Unfortunately, vacationers don't see it that way. Analysts see a widening deficit on a slight dip in revenue.
Micron, the designer and builder of advanced memory and semiconductor technologies, has stood the test of time, but red ink has been the norm lately. Wall Street's betting on a fifth consecutive quarterly deficit.
It gets worse.
Bulls may be hoping that Micron loses less than the $0.22 a share that analysts are targeting, but the company has actually posted wider deficits in each of the four previous quarters.
Nike may have turned heads yesterday in announcing an $8 billion stock repurchase plan, but the best way to woo shareholders is to resume its earnings-growth ways. It probably won't happen when the athletic footwear company reports on Thursday. The market's looking for profitability to fall by 18% for the quarter.
Finally, we have Research In Motion. These aren't good times for the BlackBerry maker. The smartphone that was once the envy of the industry is quickly falling out of favor. Wall Street's bracing for its second straight quarterly deficit on a painful 40% plunge in revenue.
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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