These three companies just didn't live up to Mr. Market's expectations last week. Sometimes an earnings stumble is a signal to sell, but digging in the dirt is also a good way to find turnaround candidates while they're getting beaten down.

This wheel's on fire
If you live in Detroit and like to see the home team win, I sure hope you enjoy hockey. Motown produced two big disappointments last week, and both Ford (NYSE:F) and General Motors (NYSE:GM) missed just about any target you could imagine. I'm just going to pick on one of the automakers here, though.

The house that Henry Ford built lost $1.31 per share on a GAAP basis, which was substantially worse than the $0.94 loss per share analysts expected. Though $32 billion of sales beat the analyst target of $28 billion, it was still a severe drop from last year's $41 billion. The motivation sounds good only if you're shorting the stock. OK, Edgar Allen Poe fans might get a morbid kick out of it, too: "The decline reflects lower volume, the sale of Jaguar Land Rover, changing product mix and lower net pricing, partly offset by favorable changes in currency exchange rates."

The company is in a frenzy of cost reductions and negotiations to shore up its cash losses. Remember the bank bailout package? Detroit wants in on some of that action, too. Ford and GM are too big to fail, just like the major banks. The auto industry may not be as important to the nation's financial system as Washington Mutual or Lehman Brothers are, but the working class rank-and-file is huge. It is estimated that 8% of the American workforce depends directly or indirectly on Ford, GM, Chrysler, and other car manufacturers. That's a huge chunk of consumer spending that flows through Detroit.

Value investors might be tempted to jump on these stocks, as Ford now sells for 25% of the year-ago price and GM took a heart-stopping 89% fall. Given some government intervention, that might make sense. But remember that you're playing with fire. The Detroit home team has been doing its best impression of the Lions and Tigers for years, losing market share to Japanese and European imports. But hey, the Red Wings seem to know what they're doing. Maybe owner Mike Ilitch could turn the car companies around?

High drama on the high seas
Greek cargo shipper DryShips (NASDAQ:DRYS) delivered adjusted earnings of $151 million, or $3.53 per share, on $329 million in sales. While that's an impressive haul, it didn't quite meet Wall Street's exacting standards and fell short of the $3.80 earnings target per share.

Fellow Fool Toby Shute likes the company and its savvy long-term contract dealings, but I'm more moved by another of my Foolish compatriots this time. Rich Smith pointed out serious management flaws a long time ago, and charges of self-serving business moves have not faded one iota. DryShips bought nine vessels from another company owned by CEO George Economou last month, and paid up with 19 million dilutive new shares and the assumption of $478 million of debt.

So DryShips is in a very profitable business, but shareholders play second fiddle to Mr. Economou's personal interests. It's bad enough to have 22% dilution in one year, but the balance sheet is starting to look shaky, too. DryShips holds $318 million of cash equivalents but $2.9 billion of long-term debt now.

I wouldn't touch this stock with a 1,500-foot Capesize carrier. Hefty growth and fat profit margins in an international package sounds good, until you dig into the management story. Fellow Greek shipping expert Diana (NYSE:DSX) sports bigger margins and less scandals than DryShips, resulting in a five-star CAPS rating. Also, our Rule Breakers team had a much better idea with a similar investment thesis in the May 2008 issue. I'll wait here while you go check it out for free.

Ending on a brighter note
OK, that's enough bad stuff for today. Our third underperformer is so solid, the Fool bought some of it.

Commercial lender CapitalSource (NYSE:CSE) saw its adjusted quarterly profit come in at $0.30 per share, while the average analyst had hoped for $0.35 per share. The company leans on a defensive portfolio of loans, and is changing its business model to become a bank holding company. Its newly created banking division is already making fresh loans to small and medium businesses, and the new deposit-based business plan looks a lot safer than the old REIT model.

CapitalSource is profitable, even operating under the riskier loan-fueled model and writing off $82 million of bad loans this quarter. That's more than you can say for larger banks like Citigroup (NYSE:C) or Wachovia (NYSE:WB), who also aim to serve the small-biz market.

Attractive bank stocks are rare these days, as most of them have too much exposure to the residential real estate market or its derivatives. CapitalSource is getting rid of mortgages altogether by the end of the year. I smell capital gains next year.

Further Foolish reading:

CapitalSource is a Motley Fool Income Investor recommendation. The Fool owns shares of CapitalSource.

Fool contributor Anders Bylund holds no position in the companies discussed this week. The Fool has an ironclad disclosure policy, and you can see Anders' current holdings for yourself.