Barron's screened the S&P 500 for stocks trading under $10/share, likely to increase 2009 EPS and with long-term obligations less than 50% of total capitalization. In no particular order, here are the eleven picks:
1) Motorola (MOT) shares are down 74% this year. Earlier this month, S&P cut the company's credit rating to junk status, and two analysts reversed their 2009 profit outlooks to an expected loss. However, long-term debt is only 21% of total capital and the next payment isn't until November 2010. Broadpoint AmTech has a 12-month price target of $10 vs. its Friday close of $4.19.
2) Tellabs (TLAB) is expected to boost 2009 earnings by only a penny per share, but the company has no long-term debt. Shares are down 40% this year, hurt by the weak market for telecom equipment.
3) Compuware (CPWR) is down 30% this year, but that's better than the 45% drop for the application-software sector. In the fiscal year ending March 2009, the company could generate $0.57 EPS, a 6% bump from FY 2008 results.
4) Jabil Circuit (JBL) reports quarterly results this week, and could see profits rise 4% to $1.16/share for the fiscal year ending in August. Analysts forecast $1.36/share for 2010. The stock sells at six times 2009 estimates.
5) Tyson Foods (TSN) saw its shares fall from $19.50 to $7.11 this year. But while rival Pilgrim's Pride is in bankruptcy court, Tyson expects higher earnings in FY 2009 and 2010.
6) Starbucks (SBUX) is down 53% this year, but Barron's is positive on the stock and continues to support management efforts to boost sales and profits.
7) Boston Scientific (BSX) faces tough competition in its critical business of cardiac stents, but expects to show profit growth in 2009. Shares are trading at $7.17, down from a 52-week high of $14.22.
8) Genworth (GNW), which sells mortgage insurance, annuities and reverse mortgages, is down 90% in 2008. Profits have taken a hit from loan defaults, tight credit and investment losses, but fees from annuity and investment-advisory businesses should help support earnings. Analysts project a 35% drop in profit this year, but a 5% gain next year.
9) Southwest Airlines (LUV) is down around 35%, but the company's balance sheet looks healthy and analysts say next year's earnings could rally 50%.
10) Eastman Kodak (EK) fell 9% last week after withdrawing its 2008 earnings guidance, its second warning in six weeks. The company has failed to keep up in a market dominated by digital photography, and analysts cut 2009 EPS to $0.20 from $0.26. Still, Kodak has brought its long-term debt down to around 22% of total capital, and carries a 6.9% dividend yield. The stock sells for less than half book value of $16.30 per share.
11) Interpublic Group (IPG) looks riskier than some other stocks that missed this list, but analysts still expect a one penny gain in 2009 EPS.