7 Companies Investors Love to Hate
03/10/2014 7:00 am EST
While some companies appear to do well no matter what, public perception can still play an important role in a company’s long-term fortunes, notes the staff of Benzinga.
Poor management, bad publicity, unpopular or outdated products and just plain nausea from a roller coaster economy can all erode investor confidence in companies. Here are seven stocks that have investors looking, and thinking, twice:
Sears Holdings (SHLD)
The iconic US retailer has been in a nose dive for several years now. Reuters reports the company expects to generate $1 billion in cash this year, by selling off its Lands’ End brand and other assets—with the expectation of using those funds to turn around its falling sales figures and beef up its new membership and rewards program.
In a recent public letter, company Chairman and CEO Ed Lampert, said that while Sears’ “financial results remain challenged,” 2013 might be the year that justifies the company’s evolution from a traditional retailer to a membership company. But many analysts remain unconvinced. Brian Sozzi, CEO and chief equities strategist at Belus Capital Advisors, tells Benzinga that Lambert “has caused a slow liquidation of the national retail chain. I mean, that is exactly what is happening in front of our eyes.”
Newmont Mining (NEM)
One of the world’s largest gold producers, Denver-based Newmont has been hostage to the gold market’s volatile mood swings. Reuters reports gold prices, while having recovered slightly so far in 2014, still ended up falling 28% last year. Investors were also disappointed by the company’s weaker-than-expected earnings report.
Reuters also says Newmont is planning to cut up to 600 jobs in Ghana, at one of its biggest facilities. Bill Selesky, analyst at Argus Research, recently told Barron’s his firm downgraded Newmont from buy to hold, “based on the company’s weak 4Q earnings and recent dividend cut, and our expectations for a continued decline in gold prices in 2014.”
J.C. Penney (JCP)
While the retail giant recently announced better-than-expected earnings, JC Penney is still a shadow of its former self. Sales and share prices fell dramatically in recent years, as consumers and investors voted with their feet, following controversial changes instituted under former CEO Ron Johnson.
His successor, Myron Ullman—who was chief executive before Johnson—says the company is in turnaround. But analysts are still dubious. “JCP is running out of easy comparisons and must deliver genuine sales and margin improvement to become CF neutral,” a Morgan Stanley report from last month noted. “We are yet to be convinced.”
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Philip Morris International (PM)
A weaker global economy and a growing international awareness of tobacco’s dangers has prompted a lot of people to give up on their smokes. Tougher anti-smoking laws, new pricing regulations against locally-produced cigarette, as well as higher excise taxes in Europe and parts of Asia, have also eaten away at the tobacco giant’s bottom line.
“We confronted an extremely harsh operating environment in 2013,” company CEO André Calantzopoulos acknowledged in a recent press statement. “Within this context, we withstood the pressures well and delivered a solid financial performance.”
2013 was a rough year for Mickey-D’s. McDonald’s found its market share nibbled away by other casual restaurant rivals, as well as due to consumer distaste for several new items on its menu. The fast food giant also didn’t endear itself with many consumers, after stories of how its in-house web site came up with tone-deaf suggestions for how McDonald’s employees could cope with their minimum-wage financial dilemmas.
The company also had to deal with worker walk-outs in several US cities last year, And in a recent SEC filing it noted that “campaigns by labor organizations and activists…to promote adverse perceptions of the quick-service category of the IEO (informal eating out) segment or our brand, management, suppliers or franchisees, or to promote or threaten boycotts, strikes or other actions involving the industry,” could negatively impact its 2014 projections.
The world’s largest retailer has also been targeted for protests by some employees and their supporters over low wages and workplace conditions. The company reported a drop in its recent fourth quarter profits, and blamed those poor numbers on the recent winter weather and the federal government’s decision to reduce food stamp programs. But some analysts suggest the company has grown too large, both at home and abroad.
Indeed, Wal-Mart recently announced it was scaling back its operations in China and closing some stories, “because we get enamored with growth,” the company’s head of corporate affairs for China told Reuters.
Perhaps it’s overkill to say the electronics chain is hated; pitied might be a better word. Like a lot of retailers, RadioShack is dealing with a still-weak economy, as well as the growing consumer trend to shop on-line, rather than in a brick-and-mortar store. The company recently announced disappointing fourth quarter earnings, and said it was closing up to 1,100 underperforming stores.
But some analysts say RadioShack itself is an anachronism. “The number one (electronics) item that people buy is a mobile device, now,” investor Kevin O’Leary said during a recent CNBC interview. “That has eroded the base on which RadioShack built its premise in the first place. I’m not an electronic hobbyist. I’m not going to buy a resistor. I buy a cellphone, an iPad or something like that.”
By the staff of Benzinga