Please ensure Javascript is enabled for purposes of website accessibility

5 Reasons to Worry About 2013

By Rick Munarriz - Dec 21, 2012 at 3:23PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

These five stocks may be popular, but analysts see them all going the wrong way on the bottom line in 2013.

With 2012 winding down, it's time to look ahead to the future.

There's a lot to be worried about, even if the Mayans were wrong about the world ending today.

Europe's still a mess. The fiscal cliff may or may not be averted by the time 2013 rolls around. The New York Jets need a quarterback.

The news isn't just iffy on the macro level. There are also more than a few companies that aren't pulling their own weight in this supposed economic recovery.

There are still plenty of names posting lower earnings than they did a year ago. Let's go over a few of the companies that are expected to go the wrong way on the bottom line next year.


Next Year EPS (estimated)

This Year EPS



Exelixis (EXEL 0.37%)




SandRidge Energy (NYSE: SD)




ARMOUR Residential REIT (ARR -0.66%)




Marvell Technology (MRVL -0.71%)




Exelon (EXC -0.64%)




Source: Thomson Reuters.

Clearing the table
Let's start at the top with Exelixis.

The cancer-tackling biotech has been a Motley Fool Rule Breakers recommendation since 2005. That's a long time for a fledgling company that has been profitless save for the final half of last year. Well, the losses continue at Exelixis, and the pros see the deficits growing larger next year.

SandRidge turned heads with plans to sell its 225,000 acres in the Permian Basin. The $2.6 billion deal would help the company pay down its debt and bankroll its shift from natural gas to oil. The bottom line, though, is that Wall Street sees the oil and gas junior posting a small loss in 2013, reversing the projected profitability for all of 2013.

ARMOUR is a REIT that invests in hybrid adjustable rate, adjustable rate, and fixed rate residential mortgage-backed securities . The attraction here rests largely on its meaty monthly dividend. At a current rate of $0.08 a share every month we're looking at a beefy 14.4% yield.

That's obviously a juicy payout, but a REIT's dividend is only as good as its ability to grow its funds from operations. Making matters worse, analysts have been inching their 2013 profit targets lower after ARMOUR came up short on the bottom line in its most recent quarter.

Marvell Technology is a developer of storage, communications, and consumer silicon. It's true, I singled Marvell out as one of five stocks less than $10 worth buying just last month. There's potential here. Storage and networking markets -- accounting for 47% and 23% of its business, respectively, at the moment -- are waiting for a global economic recovery. Marvell is also trying to make a bigger push into mobile and wireless connectivity.

The call was a good one. Shares of Marvell have risen 14% since last month's column. The pop has pushed the stock's then-3.2% yield down to 2.8%, but that's still a reasonable reward as investors wait out the market recovery.

However, it certainly isn't comforting to see Wall Street eyeing profitability to stage a retreat next year.

Finally we have Exelon.

Yield chasers were disappointed when the utility announced that it will reorient its business strategy in a way that may kiss its juicy 7% dividend goodbye. Exelon serves 6.6 million utility customers through its BGE, ComEd, and PECO subsidiaries.

Yes, last month Exelon actually raised its guidance for 2012. Analysts still see earnings growth going the wrong way come 2013.

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.

Longtime Fool contributor Rick Aristotle Munarriz has no positions in the stocks mentioned above. The Motley Fool owns shares of Exelixis. Motley Fool newsletter services recommend Exelon and Exelixis. 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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Marvell Technology Group Ltd. Stock Quote
Marvell Technology Group Ltd.
$56.94 (-0.71%) $0.41
ARMOUR Residential REIT, Inc. Stock Quote
ARMOUR Residential REIT, Inc.
$7.55 (-0.66%) $0.05
Exelixis, Inc. Stock Quote
Exelixis, Inc.
$21.52 (0.37%) $0.08
Exelon Corporation Stock Quote
Exelon Corporation
$44.77 (-0.64%) $0.29

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/07/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.