It would be great if every stock was worthy of the monstrous gains generated over the past year, but that's certainly not the case. Not every company is in better shape than it was a year ago, and I can prove it.Even as the economy shows signs of life, plenty of companies are still posting lower earnings than they did a year ago. Let's go over a few of the pretenders that are expected to go the wrong way on the bottom line next week.
Latest Quarter's EPS (Estimated)
Year-Ago Quarter's EPS
Office Depot (NYSE: ODP)
Valero Energy (NYSE: VLO)
Western Union (NYSE: WU)
Akamai (Nasdaq: AKAM)
First Solar (Nasdaq: FSLR)
Sohu.com (Nasdaq: SOHU)
Procter & Gamble (NYSE: PG)
Source: Yahoo! Finance.
Clearing the table
More companies than this will post lower earnings next week, but these are just a few of the names that really jump out at me.
Let's start with Office Depot. There aren't too many better proxies for the state of Corporate America than this office-supply superstore chain. After all, if companies aren't doing so hot, they won't load up on new file folders and toner cartridges.
"Is this the bottom for Valero?" fellow Fool Mike Pienciak asked three months ago, when the oil refiner posted a fourth-quarter loss from continuing operations of $0.28 a share. Well, it's projected to post a somewhat similar deficit this time around, so Valero is apparently still not ready to bounce back. Oil prices have spiked over the past year, but it's never that simple from a refiner's perspective, as prices for refined products don't always move in lockstep with crude.
Western Union raised its dividend and kicked off a massive $1 billion share-buyback plan five months ago. These are usually encouraging signs. If a company is pumping up its yield, it's comfortable with its future earnings potential to deliver chunkier distributions. If it's initiating a large repurchase program, it ideally believes that the stock won't get any cheaper. Western Union, after all, knows a thing or two about the art of transferring money. The jury may be out on the timing of the buyback, but analysts do see it clocking in with slightly lower earnings on Tuesday.
Akamai is the undisputed champ among content-delivery networks. Websites need to deliver speedy pages and secure downloads, and Akamai's army of servers is ready to meet the bandwidth requirements. Unfortunately, this has also been a very competitive industry, with cutthroat pricing occasionally required to land the juiciest accounts.
First Solar is the leader of thin-film solar. It's also consistently profitable, which is noteworthy given the mercurial ways of green energy. If First Solar has a silver lining, it's that it has beaten Wall Street estimates in every single quarter since going public nearly four years ago.
Sohu.com is one of China's largest new-media companies. It has interests in online portals as well as Web-based gaming. These are two industries generally thriving in the world's most populous nation, yet Sohu is expected to take a step back next week.
Finally, we have Procter & Gamble going the wrong way. The consumer-nondurables behemoth makes everything from Bounty paper towels to Pringles potato chips. Procter & Gamble upped its quarterly dividend earlier this week, exactly the kind of move that the company has prided itself on over the years. But the practice will be more difficult to continue if net income doesn't begin to grow later this year.
Why the long face, short seller?
These seven companies have literally seen better days. The market has rewarded many of these stocks with healthy gains over the past year, but they still haven't earned those upticks.
The good news 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.
© 2010 UCLICK L.L.C