If you’ve been keeping up with this daily blog, you know that earnings season is well under way, and we’ve already had our fair share of winners and losers. As I write this, shares of Facebook (FB) are up sharply higher after it posted a 16.2% earnings surprise. Under Armour (UA) is also rebounding strongly on the strength of its upbeat outlook for 2016. Meanwhile, eBay Inc. (EBAY) is in freefall after the e-commerce giant underwhelmed investors with its weak sales and earnings forecast.
Unfortunately, this earnings season will likely punish more companies than it rewards. Analysts at FactSet expect the S&P 500 to see earnings fall 6.0% over a year ago, marking the third straight quarter of shrinking profits. Sales are expected to decline 3.5% year-on-year. And thus far, many companies have been hard-pressed to beat sales and earnings expectations. The fact is that the strong U.S. dollar continues to eat away at international sales, and the deflationary environment isn’t doing any favors for commodity prices.
So my advice this earnings season is to tread carefully. I expect that many other big names will go the way of EBAY, and I don’t want you to be caught unawares. For example, next week’s schedule is full of high-profile earnings announcement, and I’ve isolated twenty “slippery slope” stocks that should be avoided at all costs. Here’s the complete list:
|Ticker||Company Name||Quantitative Grade||Fundamental Grade||My Recommendation|
|BEAV||B/E Aerospace Inc.||F||C||Sell|
|BZH||Beazer Homes USA Inc.||F||B||Sell|
|CMG||Chipotle Mexican Grill||F||C||Sell|
|DNKN||Dunkin’ Brands Group||D||C||Sell|
|DV||DeVry Education Group||F||C||Sell|
|MRK||Merck & Co. Inc.||D||B||Sell|
|OXY||Occidental Petroleum Corp.||D||F||Sell|
|RCII||RentACenter Inc.||F||D||Strong Sell|
|RL||Ralph Lauren Corp.||D||C||Sell|
|SBH||Sally Beauty Holdings||D||C||Sell|
|WYNN||Wynn Resorts Ltd.||F||D||Strong Sell|
|YHOO||Yahoo! Inc.||F||D||Strong Sell|
Please note that this is not a complete list of stocks to avoid this earnings season. These twenty stocks represent just the big-name stocks that are reporting next week. To ensure that you’re prepared for earnings season, I recommend you run all of your holdings through Portfolio Grader, at the very least. My stock grading tool will help you identify any problem areas in your portfolio and help you make an informed decision about whether to continue holding them, add to your position, or sell. And if you’re looking to screen your dividend stocks, my Dividend Grader tool is another helpful resource.
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