5 Reasons to Worry About Next Week

The economy is showing signs of fumbling the recovery.

It's not just about the aftermath of Hurricane Sandy and the early estimates of as much as $50 billionworth of damages it caused.

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

Tesla Motors (Nasdaq: TSLA  )

($0.90)

($0.55)

Add

SandRidge Energy (NYSE: SD  )

$0.00

$0.01

Add

Sequenom (Nasdaq: SQNM  )

($0.24)

($0.19)

Add

Windstream (Nasdaq: WIN  )

$0.13

$0.19

Add

Zipcar (Nasdaq: ZIP  )

$0.01

$0.02

Add

Source: Thomson Reuters.

Clearing the table
Let's start at the top with Tesla Motors.

After the market was treated to healthy reports out of the country's leading auto manufacturers, we turn our attention to the edgy maker of all-electric cars. Tesla's Model S began rolling out to early buyers this summer, and Wall Street sees Tesla's revenue doubling for all of 2012 on the strength of the sedan's popularity.

However, this quarter itself will be problematic. Analysts see a year-over-year decline in revenue and a significantly larger deficit. Investors will be tuning in to see if there is any clarity on how production has been ramping up. Any whiff as to where things stand on the company's next car -- Model X -- would be gravy.

SandRidge Energy is also reporting next week. Analysts see robust 48% growth on the top line for the natural gas and oil producer, but it's a different story on the bottom line, where those same pros feel that SandRidge will merely break even.

Sequenom is still losing money. The provider of diagnostic testing and genetic analysis solutions has yet to post a profit, and it's not going to get any closer when it reports on Thursday. However, widening losses is problematic for the life sciences company, especially since analysts don't see the company turning the corner of profitability until 2015 at the earliest.

If a deficit of $0.24 a share is bad, it's not much of a stretch to imagine it being even worse. Sequenom has posted larger-than-expected losses in each of the three previous quarters.

Windstream is another company working on a long streak of coming up short, though at least the regional telecom is profitable. A major part of Windstream's appeal is its hefty 10.4% yield, but that dividend is only as sustainable as the company's ability to grow its bottom line. If there's a silver lining here it's that analysts do see Windstream growing its profitability again in 2013.

Finally, we have Zipcar up on blocks. After posting back-to-back quarterly deficits, the leading auto-sharing service is expected to come through with a quarterly profit. The problem here is that we're only looking at net income of $0.01 a share.

Zipcar's been expanding its fleet, and its core markets continue to do well. However, concerns about the long-term viability of renting cars by the hour and disruptive approaches to the asset-sharing model have held Zipcar in the single digits.

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.

Want to learn more about SandRidge Energy? With the company halfway through its ambitious three-year plan to profitability, the future looks bright. If you are unsure about investing in 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!

Longtime Fool contributor Rick Aristotle Munarriz owns shares of Zipcar. The Motley Fool owns shares of Tesla Motors and Zipcar. Motley Fool newsletter services recommend Tesla Motors and Zipcar. 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.


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  • Report this Comment On November 02, 2012, at 1:32 PM, Decoy0527 wrote:

    Tesla is high risk and little reward. No way Musk can beat heavyweights like Toyota, Ford, and even GM. Tesla has a cult like following (investors and buyers) but unfortunately for Tesla, there are not enough rich celebrities to make the company profitable. Government loans via DOE are done, except for pay back, and the next time Musk goes to the public, you will see big-time dilution. He will have to go to the public for a 3rd time because he has no choice.

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