7 Stocks Experiencing Large Downward Earnings Revisions

 |  Includes: AA, DNDN, F, FSLR, GS, MCPIQ, NFLX
by: Bill Maurer

So far in 2011, the economic recovery just hasn't been as great as expected. In the United States, jobs are being created, but not as fast as many had hoped. Housing is still a major problem, and manufacturing has been up and down. In China, the economy has cooled off in many aspects, and faster than many have thought. In Europe, banking problems have continued, leaving the fate of the Eurozone uncertain. All of these problems have combined to make it a tough year for some companies, whether it is a sales problem, product problem, or financial problem. Here are seven names that have seen large downward earnings revisions over the past three months. In the following tables, I will use four names: CQ means current financial quarter, NQ means next financial quarter, CFY means current fiscal year, and NFY means next fiscal year. Remember when looking at a company's earnings to always look at their fiscal calendar. 2011's fiscal year could end in June for some.

First Solar (FSLR): The largest solar company has not been immune to the problems in its industry, from the Solyndra bankruptcy and fraud, to the heavy downward pressure on selling prices. First Solar has downwardly revised its earnings guidance for the full year in its last two earnings reports. Just two quarters ago, the company was expecting to earn over $9 this year. Now, they are estimating just $7 (midpoint of guidance), and analysts don't even expect that much currently. The company also took down revenue guidance for the year in a big way, from $3.65 billion to $3.15 billion in the most recent report. In percentage terms, 2011 analyst expectations have come down even more, and First Solar recently announced they will provide 2012 guidance during a conference call on December 14th. In the past three months, estimates for the current quarter have come down by 40%, and their current fiscal year (2011) are down by 25%.

90 days ago $4.32 $2.19 $9.13 $10.96
60 days ago $4.21 $2.14 $8.99 $10.66
30 days ago $3.09 $1.66 $7.42 $8.06
7 days ago $2.63 $1.50 $6.96 $7.47
Current $2.57 $1.51 $6.88 $7.44
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Netflix (NFLX): I don't think this one is a surprise to anyone. Netflix has been bleeding subscribers since they hiked their prices, which has forced them to stop buybacks and head for losses in 2012. After they enter the UK and Ireland, which will be expensive, they will put a halt on international expansion for now. Content costs are rising too quickly, and the company has never had great cash flow. The company has announced it will start losing money early in 2011, which has caused myself and others to question its profitability at all next year. Netflix is still expected to make money this quarter, although those estimates are down more than 50%. 2011 profitability is not in question since the company was extremely profitable in the first three quarters. However, next year's numbers have come down by 90% so far, and it is likely that they will come down further. It all will depend on how many customers fled this quarter, and if the company expects them to keep leaving. This company probably was due for a fall at some point due to their business model, but they shot themselves in the foot here.

90 days ago $1.24 $1.46 $4.66 $6.88
60 days ago $1.12 $1.36 $4.48 $6.49
30 days ago $0.60 ($0.18) $4.10 $1.41
7 days ago $0.57 ($0.24) $4.08 $0.76
Current $0.57 ($0.24) $4.08 $0.59
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Dendreon (DNDN): The company known for its prostate cancer drug Provenge has seen its shares take a tumble in recent months after the company withdrew its full year guidance when it reported second quarter earnings. Like many other speculative biotech firms, Dendreon thought it had the next major blockbuster that would zoom it to profitability. We're still waiting. The company has missed revenue targets multiple times, and questions over insurance reimbursements have many questioning the future of the drug. We've also seen some competitors show progress on their fronts, which has only beaten the stock down more. While the estimates for the current quarter and next quarter have held up over the past few months, one must remember that Dendreon has missed estimates the past four quarters. These misses range from 11% to 45%. That's why we've seen full year estimates come down by more than 10%, and next year's numbers down by 25%.

90 days ago ($0.56) ($0.58) ($2.74) ($1.14)
60 days ago ($0.50) ($0.48) ($2.69) ($1.25)
30 days ago ($0.50) ($0.48) ($2.70) ($1.26)
7 days ago ($0.59) ($0.57) ($3.06) ($1.53)
Current ($0.59) ($0.56) ($3.06) ($1.54)
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Goldman Sachs (GS): I felt like it was necessary to include a financial company in light of the recent problems in Europe, and Goldman's earnings revisions have been larger than most of its peers. Revenues for the firm are expected to drop over 20% this year, so it's no surprise that earnings are projected to fall more than 50%. In fact, the company has missed EPS numbers the past two quarters, and last quarter's loss was much wider than expected. In the past three months, earnings estimates for their fourth quarter have been trimmed by 37%, and the full year numbers have come down even more. Revenues and earnings are expected to rise a bit in 2012, but estimates for next year have come down by 20% over the past three months. The big banks are just struggling right now.

90 days ago $4.45 $3.97 $10.99 $16.50
60 days ago $3.48 $3.72 $8.44 $14.75
30 days ago $2.86 $3.27 $6.17 $13.51
7 days ago $2.88 $3.21 $6.16 $13.39
Current $2.81 $3.17 $6.10 $13.31
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Alcoa (AA): Shares of the aluminum producer have seen its estimates come down as aluminum prices have come down from $1.20 per pound to $0.95 per pound over the past half year, with half of that fall being in the past three months. Surely, any large fall in aluminum prices will eat into the margins of Alcoa, and earnings will fall, despite hedges. Estimates have come down by 75% for the current quarter, and by roughly a third for this year and next. It's no surprise that shares are currently under $10, and it's taken a big rally in the past week to get them there. This company needs a better global recovery to prosper, and right now, we just don't have it.

90 days ago $0.32 $0.32 $1.22 $1.40
60 days ago $0.27 $0.34 $1.12 $1.29
30 days ago $0.10 $0.20 $0.86 $1.03
7 days ago $0.09 $0.18 $0.84 $1.02
Current $0.08 $0.19 $0.84 $1.01
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Ford (F): Ford is doing well when it comes to sales, but its high cost structure is not allowing those results to transfer to the bottom line. I recently covered Ford in my most disappointing list for 2011, as shares have taken quite a tumble. Despite 15% expected sales growth this year, earnings per share are expected to decline 2% this year, and recently were forecast to be higher. The sales growth is expected to level off next year, which currently translates to a 13% dropoff in EPS. Higher sales are great, but you need to translate them to the bottom line. Ford is just not firing on all cylinders right now.

90 days ago $0.36 $0.51 $1.97 $1.87
60 days ago $0.33 $0.47 $1.93 $1.78
30 days ago $0.28 $0.44 $1.89 $1.67
7 days ago $0.27 $0.44 $1.87 $1.62
Current $0.27 $0.44 $1.87 $1.62
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Molycorp (MCP): Shares of the rare earth mineral processor have shown explosive revenue growth this year, which is expected to continue into the future. However, the growth hasn't been what many expected, falling short in recent quarters, so earnings have come up short in two of the past three quarters. The company has become profitable in 2011, but estimates for those earnings have come down 25% in the past three months. Current quarter estimates have come down even more. This company has a lot of growth ahead of it, but the picture isn't as rosy as it was just a few months ago.

90 days ago $0.75 $0.48 $2.03 $3.85
60 days ago $0.65 $0.45 $1.78 $3.48
30 days ago $0.62 $0.45 $1.78 $3.49
7 days ago $0.56 $0.60 $1.65 $3.65
Current $0.47 $0.51 $1.56 $3.34
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These are just seven examples. There are plenty of others out there if you are willing to do some research. I could've mentioned some key others, but I tried to not focus on too many names that I've previously covered in other articles. These even names provide a diversified list across a variety of industries. Perhaps the large downward revisions will enable some of these names to beat when their quarterly numbers come out. However, some, like Netflix, are expected to see numbers get whacked even further.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.