January was a good month for investors, but will the shortest month of the year belong to the shorts?
Everyone may have gotten all excited about Facebook's IPO, but what about the 99.999999% of us that don't work at the social networking website? What will come around to lift our valuations higher?
It may not necessarily be next week's batch of earnings reports. There are more than a few companies that aren't pulling their own weight in this supposed economic recovery.
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 EPS (Estimated)
Year-Ago Quarter EPS
Sirius XM Radio
Source: Thomson Reuters.
Clearing the table
Let's start at the top with Coinstar.
You may be familiar with the company's namesake coin-chomping kiosks. They take your coins and exchange them for gift card vouchers. However, Coinstar's biggest business in recent years has been its Redbox disc-rental machines.
Redbox recently raised DVD prices to $1.20. I'm not sure if it intentionally chose Halloween as the day to implement the 20% hike, but Redbox kiosks also stock Blu-ray discs and video games at higher price points. Bumping prices higher on its flagship DVD rentals should juice up margins, but Wall Street still sees profitability dipping slightly when Coinstar reports on Monday afternoon.
OpenTable is the leading player in Web-based dining reservations. OpenTable also installs electronic reservation books for restaurateurs that interact seamlessly with its online ressies. This has been a healthy top- and bottom-line grower since going public three years ago, but that is expected to change next week. For the first time since its 2009 IPO, analysts see earnings taking a dip -- and not the type that may accompany an appetizer.
Level 3 Communications posted a quarterly deficit of only $0.03 a share a year earlier, but there's a meaty asterisk here. The enterprise services provider executed a 1-for-15 reverse split back in October to kick its share price out of the penny stock muck. However, even after adjusting for the split -- which means that last year's report was actually a loss of $0.45 a share -- the pros see Level 3's widening loss more than doubling this time around.
Sprint isn't making the kind of connection that shareholders are seeking. It isn't profitable like its two larger wireless carrier rivals. It's been years since it posted a quarterly profit. Growing a wireless network isn't cheap, especially if you have to position yourself as the cheaper alternative. Next week? More red ink for Sprint, unfortunately.
Finally, we have Sirius XM Radio. The satellite radio giant already revealed that it closed out 2011 with a better-than-expected 21.9 million subscribers. No one is denying the popularity of premium radio as Sirius XM's user base grows as consumers trade in old cars for new rides with factory-installed receivers. Revenue growth is inching higher, but Wall Street believes that Sirius XM will earn just half as much as it did a year earlier when it reports on Thursday.
Why the long face, short-seller?
These 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. Lower earnings translates into higher earnings multiples, and nobody wants to see that happen.
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.
If five reasons to worry aren't enough, let's make your future No.6. There's a single shocking truth about your retirement that you may not know. It's part of a free report that won't be around forever, so check it out now.
The Motley Fool owns shares of OpenTable. Motley Fool newsletter services have recommended buying shares of OpenTable. 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. The Motley Fool has a disclosure policy.
Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.