4 Familiar Firms Going the Wrong Way in Earnings

Filed under: Company News, Microsoft, Earnings, Ford, Wall Street Watch

It's earnings season, the market indices are hitting new highs, and many companies are producing encouraging results in the coming days. However, a few household names are expected to post declines in profitability this season. Here are some names that may surprise you.

Microsoft (MSFT)

The tech giant has seen better days, and when it reports next Tuesday, analysts expect to see it posting net income of 60 cents a share. It earned 66 cents a share a year earlier.

It would be easy to dismiss the dip as a byproduct of the market's transition from PCs -- for which Microsoft is the operating system provider of choice -- to tablets and smartphones, where it is weak. However, things are starting to stabilize. Industry tracker IDC is reporting that global shipments of desktops and laptops declined just 1.7 percent during the second quarter. This is the smallest dip in two years. One possible factor: When Microsoft discontinued support for Windows XP in April, some owners upgraded systems.

Microsoft's also making inroads in tablets and smartphones. The refreshed Surface tablet and the purchase of Nokia's (NOK) handset business may not be enough to make Microsoft challenge the category leaders, but it's ultimately incremental growth. Last November's release of Xbox One has also breathed new life into its video game business. This all adds up to growing revenue, but profitability isn't going along for the ride.

DreamWorks Animation (DWA)

We're loving animated features. "The Lego Movie" is this year's second-highest grossing movie. Last year we saw "Frozen," "Despicable Me 2" and "Monsters University" rake in more than $250 million in domestic ticket sales apiece. The problem is that none was from DreamWorks Animation.

DreamWorks's summer release of "How to Train Your Dragon 2" is coming up short, leading investors to wonder if this is still the same company that gave Pixar a battle for computer-rendered animation supremacy. Wall Street expects to see profitability falling sharply to just 2 cents a share on a 31 percent plunge in revenue when it reports later this month. Is it too late for "Shrek 5?"

Ford (F)

One of the bigger aspects of the economic recovery is that we're finally getting around to replacing our cars. The average age of cars and light trucks on the road is at a record high of 11.4 years, according to automotive market research firm Polk.

The fact that Ford is the only one of the major U.S. automakers that didn't take part in the government bailout during the darkest days of the economic meltdown has made the company a market darling. Somehow, though, Ford isn't thriving in this more-upbeat environment, and analysts expect to see a profit of 37 cents a share when it reports next Thursday on flat sales growth. It earned 45 cents a share a year earlier.

Under Armour (UA)

Active lifestyles are being encouraged, and that's going to benefit makers of athletic apparel. Under Armour makes signature shirts that wick sweat from the body, making it more comfortable to finish that 5K or make it through Pilates class.

Under Armour has branched out into footwear and other athletic apparel -- categories that should be performing well. Analysts expect to see a healthy spike in sales for Under Armour. But where it counts -- on the bottom line -- the pros see it earning just 7 cents a share next Thursday compared to the 8 cents a share the company squeezed out a year earlier. That's one area where Wall Street doesn't like to see weight loss.

Motley Fool contributor Rick Munarriz owns shares of Ford. The Motley Fool recommends DreamWorks Animation, Ford, and Under Armour. The Motley Fool owns shares of Ford, Microsoft,and Under Armour. Try any of our newsletter services free for 30 days.

 

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