It's not so bad out there.
April turned out to be the Dow's best month since December. We're waist deep into earnings season, but it's also shaping up to be a record quarter in terms of profitability for the S&P 500 companies.
I realize that I can be a worrywart. I singled out several companies over the weekend projected to post lower earnings this week than they did a year earlier. Thankfully, that's just one side of the story.
There's more good news than bad news on the earnings front. Between recessionary cost-cutting and general improvement from last year's depressed levels, several companies are in better shape now than they were a year ago.
Let's go over seven companies that analysts see posting healthier bottom lines this week.
Latest Quarter EPS (Estimated)
Year-Ago Quarter EPS
Sirius XM Radio
Source: Thomson Reuters.
Clearing the table
Let's start at the top with Level 3.
The networking and Internet services provider turned heads with last month's $1.9 billion deal for Global Crossing. Both companies are sporting chunky deficits, yet both stocks rallied on the news. The combination makes sense, and there are some realized synergies that will improve the overall bottom line. Level 3's already doing that on its own, with the pros targeting a smaller quarterly loss this time around.
Sirius XM Radio shed its quarterly deficit skin several quarters ago. The satellite radio provider is routinely profitable now. The popularity of smartphone apps and new dashboard gadgetry that combine to create free aural alternatives hasn't gotten in the way of Sirius XM subscriber growth. Things are going so well that the company isn't asking shareholders to renew the authorization for a reverse split. This will mean a few more quarters of profitability in copper pennies on a per-share basis, but one penny this week is better than no penny during last year's first quarter.
MasterCard and Visa are the pros of plastic. As credit card marketers, MasterCard and Visa don't have to take on the credit risk that issuing banks do. The two financial giants simply promote their brands, play nice with merchants, and collect juicy transactional royalties along the way.
This doesn't mean that MasterCard and Visa are all-weather financials. If consumers begin swiping less or cutting up their cards, the two companies would feel the pinch. It's obviously not happening now, as analysts see earnings climbing 18% for MasterCard and 25% for Visa.
Foodies know all about OpenTable. It's the Web-based dining reservations platform of choice for the country's finest restaurants. The stock's had a wild run since going public two years ago, but it has also trounced Wall Street's profit guesstimates in each of its first seven quarters as a public company.
Priceline is the "name your own price" travel website that has evolved into an edgy portal operator for all travelers. Priceline's also been landing ahead of the prognosticators for years, so don't be surprised if its bottom line lands ahead of the $2.44 a share mark that analysts are forecasting.
Finally, we have EA. The gaming industry has been in a slump for more than two years, but EA is pegged to have its healthiest fiscal fourth quarter in ages. It has embraced smartphone gaming and digital delivery with aplomb, helping offset any weakness in the traditional console market. Is it enough? It should be. EA's profitability is expected to more than triple when it reports on Wednesday.
Cross those fingers, but know the fundamentals
These aren't the only companies expected to post year-over-year gains this week. Several companies have either found ways to grow during the recession or have simply cut enough corners to show improvement on the bottom line.
This doesn't mean that investors can rest easy. The bad news here is that these companies are expected to post improving results. The optimism is already baked into their share prices. It makes it easier for them to slip, but why begin worrying about the companies that we aren't supposed to be worrying about?
If analysts are doing a good job modeling their profit targets, we'll be just fine.
Which of the many earnings report due out this week are you looking forward to? Share your enthusiasm in the comment box below.