5 Reasons to Worry About Next Week
Mar 30th 2012 10:55AM
Updated Mar 30th 2012 10:56AM
It's been an exciting week in the market.
With just the balance of today's trading day left, the S&P 500 is off to its best start since 1998. As far as quarters go, investors would have to go back to the third quarter of 2009 to find the last time that the S&P 500 performed better than the nearly 12% gain it has delivered year to date.
However, it's not as if corporate America is playing along completely. There are 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 week.
Latest Quarter EPS (estimated)
Year-Ago Quarter EPS
|Comverse Technology (NAS: CMVT)||$0.16||$0.19||Add|
|International Speedway (NAS: ISCA)||$0.39||$0.49||Add|
|AngioDynamics (NAS: ANGO)||$0.08||$0.15||Add|
|Ruby Tuesday (NYS: RT)||$0.16||$0.24||Add|
|Schnitzer Steel (NAS: SCHN)||$0.33||$1.10||Add|
Source: Thomson Reuters.
Clearing the table
Let's start at the top with Comverse.
As the world's leading provider of software and systems enabling converged billing and active customer management and value-added voice, messaging, and mobile Internet services, Comverse is naturally looking forward to a rosier corporate outlook.
It can use the boost. Comverse is looking at slightly lower year-over-year profitability, and Wall Street's eyeing flat top-line growth when it reports Tuesday. The silver lining here is that Comverse has landed well ahead of Wall Street's bottom-line targets in three of the past four quarters.
Speed thrills at International Speedway, but it also kills. The motorsports promoter behind the Daytona 500 watches over 13 race tracks including Daytona International Speedway in Florida and Alabama's Talladega Superspeedway.
Wall Street loves a good race, but it won't get one out of International Speedway when it drives in reverse next week. Analysts are forecasting revenue and earnings to fall 20% and nearly 10%, respectively, for the quarter.
AngioDynamics makes minimally invasive medical devices used by doctors and surgeons for vascular access, surgery, peripheral vascular disease, and oncology. This would seem to be a steady business, but shareholders won't be happy if their hearts skip a beat after AngioDynamics earns barely more than half as much as it did a year earlier.
Ruby Tuesday is the casual dining chain that gets its name from the Rolling Stones. Unfortunately, investors are singing a more popular Stones track, because they can't get no satisfaction. It's not just a casual dining thing. The larger parent company of Red Lobster and Olive Garden delivered healthy growth just last week.
Finally, we have Schnitzer.
The maker of recycled ferrous metal products already let us know that it will come up way short relative to last year's showing. Schnitzer provided a preliminary glimpse into its financials two weeks ago, offering up a range of quarterly earnings per share of $0.28 to $0.35 for the period.
Schnitzer blames weaker market conditions for the squeezed segment operating margins that were lower than it was expecting as selling prices began to fall in the latter half of the quarter.
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.
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At the time this article was published Motley Fool newsletter services have recommended buying shares of International Speedway. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.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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