5 Reasons to Worry About Next Week
Jul 6th 2012 9:54AM
Updated Jul 6th 2012 9:56AM
The economy is showing signs of fumbling the recovery.
Sure, there was some good news out this week. Weekly jobless claims fell to their lowest level since mid-May. June's ADP labor report also showed that private sector payrolls rose 176,000 last month, blowing through economists expecting just 100,000 new net jobs.
However, there's still iffy news at the micro level.
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
|Alcoa (NYS: AA)||$0.06||$0.32||Add|
|OCZ Technology (NAS: OCZ)||($0.12)||$0.01||Add|
|Wolverine World Wide (NYS: WWW)||$0.44||$0.48||Add|
|Itron (NAS: ITRI)||$0.95||$1.20||Add|
|JPMorgan Chase (NYS: JPM)||$0.79||$1.20||Add|
Source: Thomson Reuters.
Clearing the table
Let's start at the top with Alcoa.
The aluminum giant -- Alcoa is short for Aluminim Company of America -- reports on Monday.
Demand for aluminum remains strong, particularly in the aerospace and automotive markets. However, the prices of many commodities have been sliding even though Alcoa earlier this year predicted global demand for aluminum to climb 7% in 2012.
Analysts see Alcoa's revenue slipping by 11%, but profitability will take an even bigger hit. The pros see the aluminum bellwether earning a tiny fraction of what it rang up a year earlier.
OCZ Technology makes solid-state drives and other computing components. Unlike Alcoa, growth isn't a problem at all for OCZ. Analysts see the California-based speedster growing its top line by 57% when it reports on Tuesday.
Unfortunately for OCZ, the small profit it mustered a year ago will likely be transformed into a modest deficit this time around.
Wolverine World Wide designs and manufactures a broad line of footwear products. One thing that Wolverine has done pretty consistently is walk ahead of the pros, having beaten analyst estimates in each of the past four quarters.
In other words, if there's one company on this list that has a decent shot of actually growing its profitability next week, it's Wolverine World Wide.
Itron gives meter readers something to read. The provider of metering solutions for utility companies is expected to earn $0.95 a share in its latest quarter. That's a big number, but it's not as big as the $1.20 a share that it earned a year earlier.
Finally, we have JPMorgan Chase on the clock. The financial services giant -- with its fingers in everything from investment banking to credit cards -- is also expected to fall short of the net income it posted a year earlier when it steps up on Friday morning.
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 The Motley Fool owns shares of JPMorgan Chase. Motley Fool newsletter services have recommended buying shares of Automatic Data Processing. 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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