The economy is showing signs of fumbling the recovery.
We’re now more than a month into the new year, and it won’t be long before the economy begins feeling the impact of the payroll tax increase that kicked in this year.
Economists feel that the move will swallow up roughly $120 billion in disposable income and shave 50 basis points off our country’s economic growth this quarter.
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|
|American Capital Ltd. (NASDAQ:ACAS)||$0.25||$0.67|
|The Western Union Company (NYSE:WU)||$0.35||$0.39|
|Cliffs Natural Resources Inc (NYSE:CLF)||$0.60||$1.42|
|Alpha Natural Resources, Inc. (NYSE:ANR)||($0.55)||($0.07)|
|Brocade Communications Systems, Inc. (NASDAQ:BRCD)||$0.16||$0.20|
Clearing the table
Let’s start at the top with American Capital. Investors approach business-development companies for their chunky yields, but that no longer applies here. American Capital hasn’t paid out a dividend since 2009. This doesn’t mean that the company hasn’t been returning money to shareholders. It’s been actively repurchasing its shares, and that’s a move that makes sense since American Capital is trading at a discount to its book value.
Analysts see the company posting a sharply lower profit on Monday than it did a year earlier, and that’s not going to make it want to dust off its stance of cash distributions. Then again, American Capital has posted better-than-expected results in each of the past four quarters. In other words, the trend here would indicate that its bottom line is holding up better than Wall Street thinks.
The Western Union Company (NYSE:WU) has been the leader in global payment services for years. The company processed 226 million consumer-to-consumer transactions in 2011 through its network of 510,000 agents across 200 countries and territories.
Unfortunately for Western Union, business is slipping. Analysts see revenue and earnings slipping in the fourth quarter, and they see the same thing happening this year, too. Are folks just not wiring money anymore, or have PayPal, Square, and other platforms taken Western Union’s growth baton?