5 Reasons to Worry About Next Week

The economy is showing signs of fumbling the recovery.

Sure, last month's sales of new single-family homes in this country rose at its highest rate since early in 2010, when the first-time homebuyer tax credit was initially set to expire. It doesn't mean that this will be sustainable if interest rates begin to inch higher.

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.

Company

Latest Quarter EPS (Estimated)

Year-Ago Quarter EPS

My

Watchlist

Ford (NYSE: F  )

$0.30

$0.34

Add

Pitney Bowes (NYSE: PBI  )

$0.48

$0.69

Add

Vonage (NYSE: VG  )

$0.07

$0.10

Add

ExxonMobil (NYSE: XOM  )

$1.96

$2.13

Add

Spirit Airlines (Nasdaq: SAVE  )

$0.35

$0.39

Add

Source: Thomson Reuters.

Clearing the table
Let's start at the top with Ford.

The automaker seems as if it shouldn't belong here. Wasn't a big theme of this month's presidential debates how well the American car manufacturers are doing? Wasn't Ford the only one of the Big Three U.S. automakers not to accept a government bailout?

Well, earlier this week Ford announced that it was slashing its European manufacturing capacity by 18% through the closure of two factories in the U.K. and an assembly plant in Belgium. Despite the improvement in car sales closer to home, the Blue Oval is every inch a global player. And even when we key in on the domestic rebound, lately Ford isn't growing as quickly as many of its rivals.

Pitney Bowes isn't really a surprise on this list. What's the point in being a leader in a dying industry? Pitney Bowes may be the undisputed top dog in metered mail, but when's the last time you wrote a letter? Sure, Pitney Bowes relies on corporate accounts. Checking your mailbox this morning probably treated you to a ton of junk mail. However, by and large, the mail is too slow these days when faxes and email are easier and cheaper.

Vonage has had a rocky road. Yes, the Web-based telephone service provider toils away in a cutthroat industry. Offering cheaper home phone service than traditional landlines may have seemed like a great business a decade ago, but it's far more competitive now that telcos and cable providers are all over the niche.

Vonage has had its runs over the years. It was an early player in smartphone apps for cheaper calls. It also bounced back after posting deficits in its first dozen quarters as a public company after completing its ill-fated IPO in 2006. Vonage has gone on to deliver quarterly profits in all but one period over the past three years.

ExxonMobil was the country's largest company by market cap until it was passed by the iEverything tech giant. What's fueling the fuel behemoth these days? Despite the higher prices at the pump, we can't say that ExxonMobil is basking in record profits. In fact, Wall Street sees an 8% decline in earnings per share when the company reports next week.

Finally, we have Spirit Airlines. You've seen the dirt cheap airfares. Maybe you've even been on a Spirit flight. The carrier gets mixed reviews from passengers. Sure, the rates can't be beat. However, the airline tacks on charges for just about anything else. If you want a reserved seat you will have to pay extra. If you bring a carry-on -- yes, a carry-on -- you will have to pay extra.

Air carriers thrived when energy prices were low, but given Spirit's low rates, it's not easy to grow the bottom line when jet fuel prices are spiking.

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.

Driven to worry
Ford has been performing incredibly well as a company over the past few years -- it's making good vehicles, is consistently profitable, recently reinstated its dividend, and has done a remarkable job paying down its debt. But Ford's stock seems stuck in neutral. Does this create an incredible buying opportunity, or are there hidden risks with the stock that investors need to know about? To answer that, one of our top equity analysts has compiled a premium research report with in-depth analysis on whether Ford is a buy right now, and why. Simply click here to get instant access to this premium report.

 
 

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Related Tickers

9/30/2014 4:00 PM
F $14.79 Down -0.32 -2.12%
Ford CAPS Rating: ****
PBI $24.99 Down +0.00 +0.00%
Pitney Bowes, Inc. CAPS Rating: ***
SAVE $69.14 Down -1.14 -1.62%
Spirit Airlines CAPS Rating: ***
VG $3.28 Down -0.08 -2.38%
Vonage Holdings Co… CAPS Rating: *
XOM $94.05 Down -0.38 -0.40%
ExxonMobil Corp CAPS Rating: ****

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