If the best that one can say is "at least we're not Greece," then maybe this economy isn't bouncing back as quickly as some of the more optimistic economists were hoping.
It's not just the global economic recovery that isn't living up to its potential.
There are still plenty of companies posting lower earnings than they did a year ago. Let's go over some of the names that are expected to go the wrong way on the bottom line next week.
Latest Quarter EPS (Estimated)
Year-Ago Quarter EPS
Christopher & Banks
Smith & Wesson
Source: Thomson Reuters.
Clearing the table
There will likely be more companies posting lower earnings next week, but these are just a few of the names that really jump out at me.
Sealy is the mattress-making giant. Unfortunately, its profitability is going to look as sleepy as its cheeky ticker symbol. Wall Street figures that Sealy will merely break even after posting a small profit a year ago. How can this be an economic recovery if we're not swapping out our lumpy mattresses?
UniFirst would seem to be an ideal proxy for Corporate America. The company outfits 1.5 million workers with uniforms and protective clothing. It's true that Wall Street sees revenue climbing nearly 7% at UniFirst when the company reports next Wednesday, but profitability is going the wrong way. Why are margins contracting?
Apollo Group is the for-profit educator offering college degrees through its virtual University of Phoenix campus. This was a growth industry during the early stages of the recession as folks updated their skill sets, but the entire niche came under fire last year for the crummy repayment rates on its student loans. Apollo has also come under scrutiny for its aggressive marketing strategies. Apollo isn't the only post-secondary education institution struggling these days, but that excuse won't make the grade with investors these days.
Christopher & Banks is a retailer of upscale women's apparel. This would seem to be a chain thriving in a recessionary recovery. Christopher & Banks' knit tops and stylish duds are popular in corporate circles. However, it's not just a matter of last year's profit being dressed in red with this quarter's deficit. Analysts see the retailer posting a loss for all of this fiscal year and all of next year, too.
Methode Electronics is well-loved around Fooldom. It's the one stock on this list that commands a five-star rating in Motley Fool CAPS. I wonder how many of those bulls know that Wall Street expects the maker of electro-mechanical devices to earn just a fourth of what it did during last year's fiscal fourth quarter.
Smith & Wesson fared well during the early stages of the economic downturn as folks armed themselves for a likely uptick in crime. Fears that Democrats would tighten gun ownership laws also triggered weaponry sales. Neither scenario actually played out that way, but Smith & Wesson's bottom line isn't shooting straight these days. It posted a surprising loss three months ago.
Finally, we have Xyratex slipping. It seemed as if the enterprise data storage specialist would be snapped up after a prolific bidding war for 3Par last summer triggered speculative interest in storage. The confetti has now been swept away, and Xyratex is looking at its second consecutive quarter of year-over-year declines on the bottom line.
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.
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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.
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