Third-quarter earnings season is just about a week away. And that’s why investors are watching seven companies in the Standard & Poor’s 500, including retailer Amazon.com (AMZN), agricultural firm Monsanto (MON) and tax preparer H&R Block (HRB) that are expected to post losses when they report their results for the third calendar quarter, according to a USA TODAY review of data from S&P Capital IQ.
Companies that lose money in the third quarter are definitely the exception and not the rule. S&P 500 companies are expected to post 6.9% higher earnings in the third quarter, says S&P Capital IQ. And all 10 sectors are expected to post higher profit. That’s down from the 10.8% growth of the second quarter, but up a bit from the 5.6% growth in the first.
So far, investors haven’t punished these stocks too severely. A custom equal-weighted index of the seven stocks expected to post third calendar quarter losses is down 1.4% over the past three months, trailing the S&P 500’s 1.2% gain during the same time. But the question is whether investors will be as forgiving when the companies actually post the losses.
That’s why investors are wise to know which companies are going to be bucking the trend and swimming in red ink. The company expected to post the most impressive loss of all the losers is Amazon.com. The online retailer is seen posting an adjusted quarterly loss of 76 cents a share. That amounts to a loss of $351 million based on the company’s 462 million shares outstanding.
And don’t think investors will automatically look past the negative sign, just because Amazon is a “growth” company. Shares of Amazon crumbled nearly 10% on July 25, the day after it reported a second-quarter adjusted loss of 27 cents a share, much deeper than the expected 15 cents a share loss. Investors are betting the company returns to the black in the fourth quarter of the year – during the key holiday season.
Investors are also expecting a big loss from Monsanto, the company that sells seeds and other engineered agricultural products. Analysts see the company posting a quarterly loss of 24 cents a share. That would amount to an adjusted loss of $125 million for the quarter. The August quarter is typically a down period for the company – it reported an adjusted loss of 47 cents a share in the August quarter of 2013. It was profitable in the November, February and May quarter, though.
There’s no question there are seasonal factors with some of these companies, which don’t fare so well in the third calendar quarter. Perhaps the best example of this is tax preparer H&R Block. The company is seen losing 41 cents a share in its quarter ended in October. The company pays rent on empty storefronts in the third quarter, only to gear up in the quarter ended in April, when taxpayers are looking for help. H&R Block is seen earning an adjusted $2.97 a share in the quarter ended in April.
But the question remains. With most companies about to post record profits in the quarter and justifying their stock prices, how will investors react to companies that lose money? And remember, too, that these are based on analysts’ estimates, which may not match reality. But that’s what makes earnings season so entertaining.
Below are the seven stocks in the Standard & Poor’s 500 that are expected to post adjusted losses in the quarter closest to the third calendar quarter:
| Company | Ticker | EPS Adj. Q3 2014 est. | Normalized loss ($ mils.) est. |
| Amazon.com | AMZN | -0.76 | -$351.6 |
| Monsanto | MON | -$0.24 | -$125.9 |
| H&R Block | HRB | -$0.41 | -$112.8 |
| Vertex | VRTX | -$0.42 | -$99.5 |
| Intuit | INTU | -$0.20 | -$58.2 |
| Leucadia Nat’l | LUK | -$0.12 | -$43.1 |
| Allegheny Tech. | ATI | -$0.6 | -$6.4 |
Sources: S&P Capital IQ, USA TODAY research
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Article source :http://americasmarkets.usatoday.com/2014/09/30/7-big-u-s-companies-about-to-lose-money/
