You don't need to look too far to bump into pessimism.
The market has been largely rallying over the past two years, but there are still mixed signals on the economic front. There's more near-term pain coming as necessary belt-tightening initiatives kick in to help tackle our problematic deficit situation.
There are also 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 head 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 probably be even more companies posting lower earnings next week, but these are just a few of the names that really jump out at me.
Let's start with A123. The maker of lithium ion batteries seemed like a slam-dunk for success when it went public in 2009, soaring 66% that year as investors were won over by A123's potential as a clean-energy player in transportation. Electric cars and hybrids are rolling off the lot with force these days, but A123 is posting even wider deficits. The once blazing-hot IPO is now meandering in the single digits.
Activision Blizzard is the world's largest video-game maker. Forget the Guitar Hero line that it recently jettisoned. This is the company behind the top-selling Call of Duty console franchise and the addictive multiplayer PC juggernaut World of Warcraft. The video-game industry has been struggling through most of the past two years, as the popularity of ad-supported social gaming and app downloads has eaten into casual gamers' playing time. Are diehard gamers enough to keep Activision Blizzard moving along? We'll know a little more come Monday.
Rosetta Stone is the language-software giant that's been teaching its shareholders foreign swear words lately. Earnings plunged by 59% in its previous quarter, and there was an 11% decline in domestic orders. Rosetta Stone has been boosting its software prices over the past year, but it hasn't been helping. The pros see a sharp loss this time around.
GeoEye provides satellite images used by mapping websites, oil-exploration companies, and the government. This seems to be a booming business, but a year ago, government contracts were accounting for two-thirds of its business. Budgetary setbacks may slow GeoEye down on that front.
Cisco is the networking-gear giant that recently killed off its Flip camera, but it's not just Cisco's consumer-facing company that's in a funk. It's facing stiff competition as it angles for corporate IT budgets.
Lifeway is trying to popularize kefir -- an Eastern European dairy beverage that's similar to drinkable yogurt -- in this country. Are tastes beginning to shift away even before it can crack the mainstream market? My local grocers seem to be overrun with Greek-style yogurt these days instead. It also doesn't help Lifeway that it has badly missed Wall Street's profit targets over the previous three quarters. In other words, even the $0.09 a share that the pros are targeting may be too ambitious.
Finally, we have NVIDIA. The graphics-chip pioneer seems to be on a roll lately, so what's it doing here? Well, even though analysts see healthy revenue and profit growth this fiscal year, they have NVIDIA coming up short on both ends in next Thursday's report.
Why the long face, short-seller?
These seven companies have seen better days. The market has rewarded many of the stocks with reasonable gains over the past year, but they still haven't earned those upticks.
The good news 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.