If there is one thing the market does not seem to tolerate these days, it is companies missing on the top line. This earnings season a company can simply blow the doors off of consensus estimates on the bottom line, but if the improvement all came from better than expected margins, and revenues were lighter than expected, the stock gets pummeled.
While this infatuation with revenues at the expense of earnings is probably not permanent, it will probably hold for the rest of the earnings season. The absolute level of earnings growth has not seemed to matter than much so far. There have been firms that have reported great top-line growth, but if they fell short of estimates, the share prices have paid the price.
Thus I decided to hunt for those firms that are most likely to disappoint on the top line. These might be fine companies with good prospects, or they might be simply awful firms. Quite frankly I didn’t look at them that closely.
What I looked for were firms where the analysts are cutting their revenue estimates for the quarter the most, and which disappointed on the top line the last time out. To make the list, there had to be more than four analysts who were forecasting revenues for the about to be reported quarter.
These are the firms that are most likely to come in light on revenues when they do report. If you like them for other reasons, it probably make sense to wait until after they report (and get beaten with the ugly stick when they post a revenue disappointment) and pick up the shares cheaper.
Most of the firms on the list are relatively small. The range form firms that are expected to have revenues of over 6 billion for the quarter — Murphy Oil (MUR) — down to expected revenues of just $16 million — Comverge (COMV). Some are expected to post revenues that a much higher than a year ago, and some are expected to see sales plunge relative to last year.
However, what matters is that they are expected to post lower sales than was expected a month ago. That, and the fact the firm has a recent history of disappointing on the top line, raise the odds that they will report a miss this time out. Even if the firm is one with great long-term potential, patience will probably be a virtue given the market’s current hypersensitivity to revenue shortfalls. Unfortunately, the converse has not seemed to hold true; few stocks have soared after reporting if they beat on the top line, unless they also beat on the bottom line.
| Company | Ticker | # Anlst in Sales Cons Completed Qtr | Compl Quarter Cons Sales Est | Sales Qtr ($mil) (06/2009) | %Ch Completed Qtr SEst – 4 wks | %Ch Curr Fiscal Yr SEst – 4 wks | %Ch Curr Qtr SEst – 4 wks | Sales Surprise % | Next EPS Report Date | |
| Evercore Partnr | EVR | 5 | $83 | $71 | -13.32% | -3.66% | -1.48% | -2.65% | 20100729 | |
| Anworth Mtge | ANH | 5 | $37 | $67 | -13.16% | -4.17% | -10.66% | -17.77% | 20100729 | |
| Cal Dive Intl | DVR | 5 | $107 | $260 | -11.91% | -2.34% | -1.01% | -18.87% | 20100728 | |
| Verisign Inc | VRSN | 14 | $203 | $257 | -9.57% | -4.69% | -6.69% | -0.50% | 20100802 | |
| Conceptus Inc | CPTS | 9 | $37 | $33 | -8.02% | -10.52% | -12.84% | -1.16% | 20100805 | |
| Cogent Inc | COGT | 6 | $25 | $32 | -7.65% | -2.45% | -3.80% | -24.49% | 20100805 | |
| Liberty Glbl-A | LBTYA | 4 | $2,197 | $2,653 | -6.24% | -4.09% | -8.14% | -4.93% | 20100803 | |
| Clean Egy Fuels | CLNE | 6 | $48 | $28 | -6.05% | 0.89% | 0.49% | -11.30% | 20100809 | |
| Interactive Brk | IBKR | 4 | $277 | $355 | -5.93% | 0.63% | 3.61% | -15.03% | 20100722 | |
| Aviat Networks | AVNW | 7 | $121 | $135 | -5.02% | -2.77% | -0.91% | -3.28% | 20100812 | |
| Amer Dairy Inc | ADY | 4 | $61 | $41 | -4.89% | -2.23% | -5.74% | -7.46% | 20100812 | |
| Freightcar Amer | RAIL | 6 | $35 | $104 | -4.64% | -2.22% | -8.37% | -27.48% | 20100805 | |
| Warner Music Gp | WMG | 4 | $696 | $769 | -4.63% | -2.18% | -5.05% | -0.99% | 20100805 | |
| Westport Innov | WPRT | 6 | $33 | $23 | -4.08% | 5.73% | 1.14% | -11.97% | 20100805 | |
| Fti Consulting | FCN | 11 | $353 | $361 | -4.06% | -3.99% | -3.59% | -0.16% | 20100804 | |
| Perfect World | PWRD | 8 | $90 | $70 | -3.53% | -2.26% | -5.52% | -1.65% | 20100810 | |
| Calif Pizza Kit | CPKI | 13 | $162 | $171 | -3.46% | -1.71% | -1.57% | -0.06% | 20100805 | |
| Affil Managers | AMG | 9 | $294 | $201 | -3.40% | -3.14% | -4.21% | -26.27% | 20100727 | |
| Nyse Euronext | NYX | 9 | $662 | $1,251 | -3.21% | -1.70% | -2.07% | -1.00% | 20100803 | |
| Comverge Inc | COMV | 15 | $16 | $13 | -3.17% | 0.02% | -0.14% | -0.66% | 20100729 | |
| Eurand Nv-Ord | EURX | 8 | $44 | $43 | -2.65% | -3.56% | -5.31% | -7.58% | 20100805 | |
| Teleflex Inc | TFX | 4 | $445 | $483 | -2.55% | -0.57% | -2.38% | -4.41% | 20100722 | |
| Amylin Pharma | AMLN | 15 | $175 | $209 | -2.50% | -1.51% | -2.79% | -7.90% | 20100721 | |
| Fidelity Nat Fi | FNF | 5 | $1,419 | $1,570 | -2.48% | -1.80% | -2.13% | -8.46% | 20100721 | |
| Employers Hldgs | EIG | 4 | $100 | $127 | -2.48% | -3.13% | -2.71% | -12.90% | 20100805 | |
| Gmx Rsrcs Inc | GMXR | 6 | $25 | $23 | -2.45% | -4.50% | -5.92% | -5.07% | 20100804 | |
| Murphy Oil | MUR | 4 | $6,247 | $4,556 | -2.42% | -10.91% | -2.17% | -13.43% | 20100804 | |
| Tradestation Gp | TRAD | 9 | $36 | $35 | -2.40% | -1.18% | -0.03% | -0.14% | 20100722 | |
| Global Inds Ltd | GLBL | 7 | $150 | $295 | -2.32% | -1.79% | -2.80% | -19.00% | 20100804 | |
| Amer Italian | AIPC | 6 | $137 | $146 | -2.25% | -0.83% | -2.15% | -5.50% | 20100805 | |
| Regis Corp/Mn | RGS | 8 | $597 | $625 | -2.13% | -1.24% | -2.14% | 0.00% | 20100826 | |
| Netease.Com-Adr | NTES | 9 | $187 | $126 | -2.06% | -2.26% | -2.94% | -5.90% | 20100818 | |
| T. Rowe Price | TROW | 14 | $580 | $442 | -2.00% | -2.07% | -3.46% | -2.45% | 20100723 |
Dirk van Dijk, CFA is the Chief Equity Strategist for Zacks.com. With more than 25 years investment experience he has become a popular commentator appearing in the Wall Street Journal and on CNBC. Dirk is also the Editor in charge of the market beating Zacks Strategic Investor service.
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