As corporate earnings go, so goes the stock market. And indications are that we’re running into trouble. As a result, there are many stocks to sell. Over the past few weeks several leading U.S. companies have issued negative pre-announcements, lowered or pulled their forward guidance, implemented cost cuts, and warned of more pain ahead. The reasons for the dire outlooks range from inflationary pressures and supply chain disruptions, to weakening consumer demand and rising interest rates. It all adds up to what could be a very negative spate of third quarter earnings in the coming weeks. Poor results from leading blue-chip companies in the U.S. are sure to send already jittery stock markets lower.
With that in mind, here are three stocks to sell before they get stomped by Q3 earnings.
FedEx (NYSE:FDX) is one of the top stocks to sell. All after the company sent shockwaves through the market by pulling its earnings guidance and reporting preliminary results that missed expectations by a wide margin. The Memphis, Tennessee headquartered company blamed weakness in Asia and ongoing issues in Europe for the poor preliminary results and withdrawn guidance. Investors weren’t in a forgiving mood. FDX stock fell 21% immediately after its guidance was withdrawn, and dragged the market down with it.
Earnings for the company’s fiscal first quarter were projected to be $3.44 per share. That’s well below the $5.10 average estimate of analysts who cover the shipping and logistics giant, according to Barron’s. Preliminary revenue of $23.2 billion in the quarter ended August 31 also missed Wall Street forecasts. To help right its ship, FedEx said it plans to cut costs by parking aircraft, cutting employee hours, and closing 90 FedEx locations.
FDX stock is now down 42% on the year and trading at just over $150 per share. Sell before things get any worse.
General Electric (GE)
Boston-based industrial manufacturer General Electric (NYSE:GE) also recently issued a warning to analysts and investors. The company recently said that ongoing supply chain issues will drag down its upcoming earnings. Specifically, GE said that difficulties in obtaining parts from suppliers are hurting its ability to deliver key products such as jet engines. The supply chain problems are pushing the company’s planned shipments further out into next year. All creating a situation that could negatively impact its profits, near term.
General Electric also highlighted that it is facing other challenges such as squeezed profit margins at its healthcare division and a decline in demand for wind turbines. The myriad of problems are pressuring GE’s cash flow, which the company expects to be in line with the $162 million it generated in this year’s second quarter. To help improve the situation, GE plans to cut costs for the remainder of 2022 and into 2023, though it didn’t provide specific details.
GE said it now expects full year earnings at the lower end of a $2.80 to $3.50 per share range. The company also lowered its free cash flow forecast by $1 billion, taking it down to between $4.5 billion to $5.5 billion for 2022. The latest earnings warning sent GE stock down 4%, bringing its year-to-date losses to 33%. The company’s shares are now trading at $63.68 apiece and have declined 67% over the last five years. Get out while you can.
As with FedEx, Ford (NYSE:F) sucker-punched markets with an earnings pre-announcement. Ford also leads the list of stocks to sell. The Detroit automaker said its supplier costs are $1 billion higher than had been expected due to rising inflation. As a result, Ford now anticipates earnings in the range of $1.4 billion to $1.7 billion when it next reports results in October. The revised forecast is well below the $3.7 billion in earnings Ford reported in its previous quarter, and the $3 billion it earned in the same period last year. F stock dropped 12.5% on the earnings warning, its worst one-day performance since 2011.
Making matters worse, Ford said ongoing parts shortages are likely to keep its inventory of incomplete vehicles elevated in the months ahead. Specifically, Ford said its number of partially completed vehicles will total 40,000 to 45,000 at the end of the current third quarter. The company said it remains confident that it can complete and sell those unfinished vehicles by year’s end. Ford concluded its news release by saying it still expects to earn $11.5 billion to $12.5 billion for the full year, unchanged from its previous guidance. However, the company cautioned that it will provide more information about its finances when it releases Q3 earnings on Oct. 26.
Ford stock is down 41% this year and changing hands at under $12 per share. Any more bad news could send the share price even lower.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.