The year is ending on an upbeat note. The Dow hit a two-year high this week, and most investors appear to believe that the economy will continue to improve in 2011.
Well, not so fast.
Despite the buoyant optimism, there are still plenty of companies projected to post lower earnings in 2011 than they did in 2010. Let's go over a few of the names that are expected to go the wrong way on the bottom line next year.
2011 EPS (Estimated)
2010 EPS (Estimated)
Advanced Micro Devices
Source: Thomson Reuters.
Clearing the table
There will likely be more companies posting lower earnings next year, but these are just a few of the names that really jump out at me.
Let's start with Yahoo!. CEO Carol Bartz will be in her third year at the helm of the online giant. There is certainly potential at Yahoo!, if only it could be more effective in monetizing its gargantuan page views.
Corning is the specialty ceramics company that tacked on some tech sizzle when it became a popular fiber optics play. Between challenges for telecommunications equipment makers and the freefall in prices of LCD screens, Corning isn't going to be at its best come 2011.
SanDisk is the leading maker of flash memory products. Despite the economies of scale inherent with its pole position, this can still be a cutthroat industry. SanDisk has tried to break free from of its commoditized stronghold, but its Sansa portable media players are distant silver medalists in an iPod world and its ridiculous slotMusic digital music platform has yet to take off.
Chesapeake Energy may be Carl Icahn's latest activism target, but the natural gas producer may let the billionaire investor down if he feels he's buying into a company that will post improving earnings in the year ahead.
AMD and Intel are the leading makers of microprocessors. Yes, there's an excellent chance that there's an Intel or AMD chip powering your computing experience right now. So what gives? Isn't a kinder climate for a global economic recovery just what these cyclical players need? Companies ramp up IT budgets after recessionary lulls, upgrading dated equipment. Well, that may be true, but this is still a competitive industry where earnings and volume don't necessarily go hand in hand.
Finally, we have UnitedHealth calling in sick. On the one hand, there are tens of millions of uninsured Americans that will be on the rolls in a few years. The downside here is that regulatory forces will keep premiums in check.
Why the long face, short-seller?
These seven companies have -- literally 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 next year. In other words, the bad news is already baked into the shares.
The more I think about it, the less worried I become.
Chesapeake Energy, Intel, and UnitedHealth Group are Motley Fool Inside Value selections. The Fool owns shares of and has bought calls on Intel. Motley Fool Options has recommended buying calls on Intel and a diagonal call position on UnitedHealth Group. The Fool owns shares of UnitedHealth Group, which is also a Motley Fool Stock Advisor recommendation. 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.
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.