These three companies just didn't live up to Mr. Market's expectations last week. Sometimes an earnings stumble is a signal to sell, but digging in the dirt is also a good way to find turnaround candidates while they're getting beaten down.
We've got a gloomy bunch of tickers today, as the S&P 500 benchmark outperformed all three of these underperformers last week.
Pop goes the fizzle
Let's start with global soda-pop wrangler Pepsico
CEO Indra Nooyi cited "weakness" in the domestic beverage market and a "challenging macro environment." Fellow Fool Rich Smith isn't sure that the argument holds water, though -- archrival Coca-Cola
But Pepsi isn't just sitting there with its arms crossed, waiting for a miracle. Management is taking drastic action to improve the operational performance, which includes cutting some 3,300 heads over the next three years to reap about $1.2 billion in pre-tax savings. The pipeline of product announcements has been rejiggled as well, and it will be exciting to see the two soda titans duke it out with new flavors, new artificial sweeteners, and maybe even whole new categories of soft drinks to capture the hearts and minds of us increasingly fickle consumers.
Hey, both companies have distribution deals with Hansen Natural
Going whole hog
Unlike some other vehicular veterans I can think of, Harley isn't blaming the North American market. "Dealer retail sales of new Harley-Davidson motorcycles in the quarter were in line with our expectations," said CEO Jim Ziemer. The problem lies abroad, with sluggish sales in several European countries. It's still the same worldwide financial crisis of course, but a different corner of it.
Ziemer also said that "prudent management and customer access to credit will continue to be priorities" for his company, as they should be. Once the storm blows over, I think the markets will go hog wild over Harley once again. Honda
Let the sun shine in
Finally, we've arrived at solar panel manufacturer Evergreen Solar
It's tough out there for a small tech company at the bleeding edge of technical development. Evergreen's stock has dropped off a steeper cliff than the rest of the market, losing 64% of its value in one short year. Even four-star CAPS stock and Motley Fool Rule Breakers recommendation Suntech Power
Evergreen can't really afford that skepticism for too long. You've seen the tiny revenue stream and the net losses already, but there's also a $374 million load of long-term debt hanging over the company's head. When Evergreen needs fresh cash, it sells more shares to the tune of 34% dilution in twelve months.
Though the payoff may be huge if Evergreen survives until it matures a bit, the risks are also very large. CEO Richard Feldt thinks that his company is "fundamentally strong," and a couple of big orders in the last quarter are harbingers of "substantial profitability in 2009,” he said. Maybe. But I'm not buying this stock until I see the balance sheet firming up. That's too much dilution for my tastes.
Further Foolish Reading:
Seeking great deals on unfairly punished stocks? Philip Durell and his merry band of Fools at the Motley Fool Inside Value newsletter service are standing by to help you find great stocks at ridiculously low markdowns. Try a 30-day trial subscription to see if bargain-hunting is right for you. Coca-Cola is a Motley Fool Inside Value pick. Suntech Power Holdings is a Motley Fool Rule Breakers recommendation.
Fool contributor Anders Bylund owns shares in Coke and Hansen, but holds no other position in the companies discussed this week. The Fool has an ironclad disclosure policy, and you can see his current holdings for yourself.