Mixed signals are the greens of choice with Mr. Market's salad these days.
On the one hand they tell us that the recession officially ended over a year ago, but then we continue to get pesky unemployment data.
Stocks also provide us with mixed signals. September was a great month for equities, yet there are still plenty of companies that don't seem worthy of the upticks.
Sadly, there are still plenty of companies posting lower earnings than they did a year ago. Let's go over a few of the names that are expected to go the wrong way on the bottom line next week.
Latest Quarter's EPS (estimated)
Year-Ago Quarter's EPS
Source: Thomson Reuters.
Clearing the table
There will be more companies posting lower earnings next week, but these are just a few of the names that really jump out at me.
KMG specializes in chemicals related to electronics, wood treatment, and animal health. It has never shied away from acquisitions, but that hasn't gotten in the way of its focus on profitability. Earnings per share have grown at an impressive compounded 34% rate over the past five years. That rate is about to take a hit, going by the sharp decline in net income that the pros are expecting.
Oil-Dri is the country's largest maker of cat litter, but something stinks in its income statement. Investors approach Oil-Dri as an all-weather company, because nobody will put up with a smelly or fussy cat when a refill of Johnny Cat will fix things. Oil-Dri also boosted its dividend three months ago, a move that typically come from a growing company. Well, Oil-Dri's earnings growth isn't exactly purring along nicely these days.
Banco Latinoamericano de Comercio Exterior -- or Bladex -- offers the one-two punch of a chunky 4.3% yield and international exposure. It is one of the leading trade banks in Latin America. Investors accept certain risks when buying into overseas companies, but few investors may be bargaining for bottom-line weakness with emerging markets as hot as they are.
Spartan operates a grocery store chain. This is another industry that has historically been portrayed as recession resistant. Cupboards still need to be stocked, and tight times usually means more business since folks aren't eating out as often. Unfortunately for Spartan shareholders, there's a spill on aisle four.
WD-40 is another company that recently hiked its payout rate but is just not growing its profitability to keep the meatier dividends going. The company makes the namesake lubricant that happens to be the logical solution to everything from creaky doors to dry joints, but it's poised to post a big drop in earnings next week.
Biotech Cubist recently held a "Raise the Roof" event to celebrate new construction that will expand its lab and administrative space by 104,000 square feet. This is the kind of move that one associates with growth, but Cubist's earnings are pegged to dip slightly relative to last summer.
Finally, we have Valmont. The company makes light poles and other support structures. Unless it comes through with a surprise, this will be the third consecutive quarter in which Valmont posts lower earnings than it did a year earlier.
Why the long face, short-seller?
These seven 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.
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.
True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community.
Longtime Fool contributor Rick Munarriz wonders if his contrarian heart will ever be happy. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.