8 Reasons to Hate Earnings Season

Autumn is in the air, and it's not just the leaves that will be losing their green in the coming weeks.

The Wall Street Journal is reporting that -- for the first time in nearly three years -- companies in the S&P 500 are expected to post an overall decline in profitability.

Thomson Reuters sees a 2.9% decline in earnings. S&P Capital IQ sees a slightly smaller deficit. However, both analyst trackers do see companies, on average, posting lower net income this time around.

In other words, earnings season has never been this scary.

Is the economy starting to falter? Have companies simply run out of fat to trim away? Every company has a unique story to tell, but let's take a look at some of the companies that are projected to post lower profits when they report in the coming weeks.

Company

Latest-Quarter EPS (Estimated)

Year-Ago Quarter EPS

My Watchlist

Windstream (Nasdaq: WIN  )

$0.13

$0.19

Add

Amarin (Nasdaq: AMRN  )

($0.22)

$0.61

Add

Alcatel-Lucent (NYSE: ALU  )

($0.01)

$0.12

Add

Hasbro (Nasdaq: HAS  )

$1.20

$1.27

Add

SandRidge Energy (NYSE: SD  )

$0.00

$0.00

Add

Pitney Bowes (NYSE: PBI  )

$0.48

$0.69

Add

VIVUS (Nasdaq: VVUS  )

($0.31)

($0.10)

Add

Dangdang (NYSE: DANG  )

($0.26)

($0.15)

Add

Source: Thomson Reuters.

We're going down
Windstream is a regional telecom that has become an income investor darling. With its chunky yield of 9.9%, it's easy to see the appeal. However, a payout is only as sustainable as a company's profitability. This is shaping up to be the third consecutive quarter of a year-over-year dip in net income.

Amarin's projected loss may not seem to be too much of a problem. After all, the company has been one of the market's bigger winners -- a better than 20-bagger since bottoming out three years ago -- on the potential of its FDA-approved triglyceride-reducing drug, Vascepa. Folks are buying into Amarin for what it will be in the future, and not necessarily what it is right now.

Alcatel-Lucent is coming off its first quarterly deficit in a year, and the market's braced for a repeat performance. Alcatel-Lucent isn't the only telecom equipment maker to be struggling, but that's not a convincing argument in favor of Alcatel-Lucent, either.

Hasbro is the country's second-largest toy maker, and the company behind Mr. Potato Head, Play-Doh, and Monopoly isn't winning the game these days. Wall Street sees a slight dip in earnings on flat revenue growth. That's not what investors like to see heading into the telltale holiday shopping season as retailers stock up on what they believe will be the hottest toys.

SandRidge Energy is an emerging oil and gas junior. There are plenty of opportunities opening up for SandRidge, but theyr'e apparently not materializing on its bottom line. The pros see the company merely breaking even despite a 46% top-line surge.

Pitney Bowes has a pretty understandable predicament. It's the undisputed champ of a dying industry. Metered mail may have been great in the past, but the way we correspond with one another has changed in this age of faxes and email missives.

VIVUS is one of the handful of potentially promising biotech companies looking to conquer obesity. You know what's pretty fat these days, though? VIVUS' chunky losses. Sure, investors are willing to overlook the near-term red ink; shares of VIVUS have actually more than doubled this year alone. However, sooner or later, it's going to have to shape up on its income statement.

Finally, we have Dangdang. The Chinese online retailer was a hot IPO when it went public two years ago, but its inability to contain costs while growing its business have weighed on both the stock and its financial reports.

More than meets the slide
There's more bad news.

Many of these companies -- Windstream, Amarin, Alcatel-Lucent, VIVUS, and Dangdang -- actually missed Wall Street's profit targets a quarter ago. In other words, even the declines that are being projected right now may be too optimistic.

Thankfully there's also good news here. Some of these companies are still growing on the top line. Others have encouraging long-term prospects. However, since this earnings season is starting to look like a very dangerous minefield, you may want to avoid some of the more likely disappointers right now.

Wait until the leaves change colors -- and fall -- before breaking out the rake.

 

Investors were startled after SandRidge plummeted when natural gas prices reached 10-year lows, but with the company halfway through its ambitious three-year plan to profitability, the future looks bright. If you are unsure about the future of this emerging oil and gas junior, and are looking to find out more about its strengths and weaknesses, you should view this brand-new premium report detailing SandRidge's game plan and what to expect from the company going forward. To get started, click here!


 

Rick Aristotle Munarriz has no positions in the stocks mentioned above. The Motley Fool owns shares of Hasbro. Motley Fool newsletter services recommend Hasbro. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (0) | Recommend This Article (16)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2053534, ~/Articles/ArticleHandler.aspx, 10/1/2014 8:24:40 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Apple's next smart device (warning, it may shock you

Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early-in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!


Advertisement