Lowering guidance can bring on a world of pain for a company. Not only does the stock take a hit when the news is announced, but it can also continue to fall for quite a while afterwards. Investors face a dilemma: Is it time to join the mad dash for the exits, or is this a buying opportunity in disguise?
A guide to the future
It's not always easy to tell whether your company is having a fire sale or burning down. With the help of Motley Fool CAPS, however, understanding the difference is now a whole lot simpler.
The investor-intelligence database compiles the stock-picking opinions of more than 110,000 professional and novice investors. Pairing that information with companies that have recently lowered their guidance should help us decide which of the stocks are hotter than hot, and which aren't worth wasting water to douse. A high CAPS rating accompanied by lowered guidance could present you with a real deal.
Here are five companies that have recently guided lower, coupled with what CAPS investors think:
|
Company |
Period |
Analyst Est./Previous Guidance |
Updated Guidance |
CAPS Rating (5 max) |
|---|---|---|---|---|
|
Burlington NorthernSanta Fe (NYSE:BNI) |
Q2 2008 |
$1.41 |
$1.30 |
***** |
|
Carnival (NYSE:CCL) |
Q3 2008 |
$1.78 |
$1.56-$1.58 |
** |
|
Coventry Health Care (NYSE:CVH) |
FY 2008 |
$4.43 |
$3.66-$3.75 |
**** |
|
FedEx (NYSE:FDX) |
FY2009 |
$5.92 |
$4.75-$5.25 |
*** |
|
United Parcel Service (NYSE:UPS) |
Q2 2008 |
$0.97 |
$0.83-$0.88 |
** |
Source: Briefing.com; Motley Fool CAPS.
Now, this isn't a list of stocks to buy. Things rarely work all the time in investing, so this is only a list for further research.
Return to sender
Not surprisingly, the high cost of fuel and the slowing U.S. economy are taking the two biggest package-delivery companies down a peg or two. Both United Parcel Service and FedEx issued press releases highlighting this tag-team duo of downward drags, which weighed on earnings and make the future look suspect.
It's a tough operating environment, and investors like top-rated CAPS All-Star Jeffreyw realize that without the ability to pass along fuel increases, any hoped-for rebound must be pushed farther out:
I may have to move my time frame for [FedEx] as they are less able to pass on fuel costs without losing shippers in the process. They've been lowering estimates, but they still dominate the overnight market, which is most profitable. They continue to build out their ground network, but lawsuits from contractors could weigh down shares this year.
Others, like CAPS investor HollywoodDan, see the case for UPS and FedEx a little differently, in that more business will be conducted digitally to offset the costs of fuel. Either that way or through those rising costs, delivery businesses get hurt just the same:
Same idea here as I have on FedEx-people will do more and more business digitally as fuel prices rise. This has to lead to a situation where these guys struggle to keep up. Odds are that at most, they beat the S&P by a little. But there's a decent chance they suffer a long, slow decline.
Guide on!
Looking at stocks whose shares have taken a dive on diminished outlooks can be a painful experience. Your input, though, can help guide other investors to higher prospects for growth, even in the face of lower guidance. Head to Motley Fool CAPS, and let your voice lead the way.
