The economy is showing signs of fumbling the recovery.
Unemployment is now expected to linger above 6.5% through at least 2015, and that's considering the ramifications of going over the fiscal cliff like the end of Thelma & Louise.
The news isn't just iffy on the macro level. There are also 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.
Company | Latest-Quarter EPS (Estimated) | Year-Ago Quarter EPS | My�Watchlist |
|---|---|---|---|
FedEx (NYSE: FDX ) | $1.41 | $1.57 | Add |
Jabil Circuit (NYSE: JBL ) | $0.56 | $0.65 | Add |
American Greetings (NYSE: AM ) | $0.48 | $0.50 | Add |
KB Home (NYSE: KBH ) | $0.06 | $0.18 | Add |
TIBCO Software (NASDAQ: TIBX ) | $0.39 | $0.42 | Add |
Source: Thomson Reuters.
Clearing the table
Let's start at the top with FedEx.
The parcel delivery giant is a solid proxy for the economy in general. If money is flowing freely at the consumer level, it should show up in a pickup in speedy deliveries. Well, the news isn't all that encouraging on that front.
The situation isn't as dire as the 10% drop in earnings per share suggests. Analysts see revenue climbing 2%. However, FedEx's top-line growth merely keeping pace with inflation isn't all that exciting.
Jabil Circuit is another slider. The contract manufacturer for electronics is expected to earn $0.56 a share when it reports on Wednesday, well short of the $0.65 a share it served up a year earlier.
Don't be surprised if it's less than that.
After merely meeting analyst profit targets for three consecutive quarters, Jabil came up short in its latest quarter. The trend would seem to indicate that Wall Street may be too optimistic here.
It probably isn't a surprise to see American Greetings on this list. Who sends out traditional greeting cards these days when a simple Facebook post will do? Who keeps stationery around when email does the trick?
Purists may be cringing at those suggestions, but it's true.
The surprise here is that American Greetings is actually expected to grow its revenue by nearly 17% for its latest quarter. Margins are where the greeting card giant's performance begins to come undone. Unfortunately for investors, the company has missed Wall Street expectations in three of the past four quarters.�Ouch!
KB Home is a surprising name to see on this list. Homebuilders have been bouncing back in a major way this year. Home prices are starting to inch higher again, and that's a dinner bell for potential homebuyers who have been putting off the move to close on new digs.
Low mortgage rates also are only helping here. However, the pros see KB Home earning just a third as much as it did a year earlier. Given the strength in recent reports out of other real estate developers, the smart money has to be on KB Home earning more than $0.06 a share. It will still take a very strong effort to break through the $0.18 a share that it earned a year earlier.
Finally, we have TIBCO. The provider of enterprise software solutions is slipping, though not necessarily by much. Wall Street's targeting net income of $0.39 a share when TIBCO reports on Thursday, just shy of the $0.42 a share it earned a year earlier.
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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