5 Reasons to Worry About Next Week

The economy is showing signs of fumbling the recovery.

The number of Americans filing new jobless benefits claims has fallen to a five-year low and unemployment has fallen to 7.5%, but a lot of companies have been painting gloomy pictures of their near-term revenue generation.

The news isn't just iffy on the macro level. There are also 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

Windstream (NASDAQ: WIN  )

$0.11

$0.13

Exelixis (NASDAQ: EXEL  )

($0.28)

($0.18)

SandRidge Energy (NYSE: SD  )

($0.06)

$0.04

Universal Display (NASDAQ: OLED  )

($0.10)

($0.03)

Roundys (NYSE: RNDY  )

$0.21

$0.28

Source: Thomson Reuters.

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

The regional carrier is the highest-paying dividend stock in its niche, but there are concerns about the sustainability of its current 11.9% rate. Some of its peers have already slashed their distributions to more manageable levels. As rural customers eliminate their hardwired landlines, it will be a challenge to offset those defections with growth in other services.

Windstream stood by its $0.25 a share quarterly rate in February, but a dividend cut at some point this year wouldn't be a surprise.

Exelixis is a cancer-tackling biotech that's been reporting losses as it tries to get its lead candidate approved for the treatment of tumors that have metastasized to the bone. Exelixis had a promising presentation during last month's annual American Association for Cancer Research meeting, but the losses will continue in the near term. This time around the red ink is expected to widen.

SandRidge Energy has cranked out six consecutive quarterly profits, but Wall Street's bracing for a reversal here. The oil and gas explorer is expected to post a loss of $0.06 a share.

Unfortunately, this isn't likely to be a rare event. Analysts see SandRidge posting a loss for all of 2013 as well as all of 2014.

Universal Display is also going the wrong way. The pioneer in organic light-emitting diode displays is expected to post a widening deficit, and it could get even uglier than the $0.10-a-share loss that the pros are projecting. Universal Display has come up short on the bottom line every quarter over the past year.

Finally, we have Roundys.

The regional grocer went public last year, and it didn't get off to a good start. By the end of the year the busted IPO had cut its quarterly dividend nearly in half as the leveraged supermarket chain moved to preserve capital. The shares have bounced back this year. Roundys stock has soared 65% in 2013. However, it's not as if the fundamentals match the ascent. Wall Street sees profitability sliding 25% when it reports next week.

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.

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Read/Post Comments (3) | Recommend This Article (3)

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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.

  • Report this Comment On May 03, 2013, at 7:01 PM, mrconnors0531 wrote:

    If you add the Permian sell on SD's balance sheet would it be losing six Cents.

  • Report this Comment On May 04, 2013, at 5:35 PM, TMFBreakerRick wrote:

    mrconnors, that's fair, but I'm using Wall Street estimates that disregard one-time items.

  • Report this Comment On May 05, 2013, at 2:15 PM, mrconnors0531 wrote:

    I believe if your going to judge return on assets you should also be fair to Mr Ward. Mention that when the Permian sell is finalize it could show a multiple dollar per share return. And have almost two million acres to drill. I am long SD and SDR. Investing in a company that Is growing revenue as fast as Sandridge is dicey but the rewards can be significant just look at Amazon, Workday or Facebook .

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