The economy is recovering.
Encouraging employment news, a controversial jump-start for the housing industry, and generally better-than-expected earnings reports are giving investors hope that better times are just around the bend.
Well, here's where this bend breaks.
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
|Limelight Networks (NAS: LLNW)||($0.02)||$0.00||Add|
|Peet's Coffee (NAS: PEET)||$0.43||$0.48||Add|
|Powerwave (NAS: PWAV)||($0.61)||$0.30||Add|
|NVIDIA (NAS: NVDA)||$0.19||$0.23||Add|
|Campbell Soup (NYS: CPB)||$0.62||$0.71||Add|
Source: Thomson Reuters.
Clearing the table
Let's start at the top with Limelight Networks.
Running a content-delivery network isn't easy in this cutthroat climate, though the industry leader may be helping smaller players including Limelight by going on a buying spree.
Things may get better for Limelight once the niche consolidation helps improve pricing elasticity, but it's not pretty right now. Analysts see Limelight dipping into the red when it reports on Monday after an 18% decline in revenue.
Java junkies may be surprised to see Peet's Coffee on this list. The two premium coffee bellwethers posted blowout quarterly results just last week. Coffee prices have inched higher over the past year, and consumers know that they have to pay up for the good stuff.
Peet's is the good stuff, right? Analysts do see revenue climbing 12% higher, but deteriorating margins is why they see the coffee company percolating the wrong way. Oh for Peet's sake!
Powerwave Technologies is struggling. The provider of wireless solutions resorted to a 1-for-5 reverse stock split to drag its stock out of penny stock pricing back in October, but it's falling back into the buck bin again. It certainly doesn't help that it's about to post back-to-back quarters of substantial deficits. The reverse split may be magnifying the red ink on a per-share basis, but Powerwave needs to restore investor confidence -- and quick.
NVIDIA is the leading player in programmable graphics processors. From high-performance PCs to video game consoles -- and now in fast-growing smartphones and tablets thanks to the success of its Tegra chips -- NVIDIA is never too far away when graphics matter.
Unfortunately not all analysts like what they see in NVIDIA. Sterne Agee analyst Vijay Rakesh removed the stock from his firm's "Catalyst Driven Idea List" on fears that it may issue a soft outlook next week. The stock had already hit his $16 price target, too.
Finally, we have Campbell Soup. An overall decline in soup consumption caused Campbell to deliver weaker revenue and earnings in its previous quarter three months ago. The food giant ramped up its marketing efforts in September, hoping to gain momentum heading into the "soup season" that we're in right now.
Well, analysts don't appear to be too impressed with what this will all mean for the company's bottom line. There's more to Campbell's than soup, of course. This is the company behind Goldfish crackers, Pepperidge Farm desserts, and several more food lines. However, until the company can get its canned soup business turned around its quarterly reports will probably result in canned laughter.
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 translate 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.
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At the time this article was published Motley Fool newsletter services have recommended buying shares of NVIDIA. Motley Fool newsletter services have recommended writing puts in NVIDIA. 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.
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