For the most part the numbers have been at best poor. Some would say abysmal. Bottom line profits might be meeting expectation, but revenues are coming up short.
For a forward looking market nothing could be worse. If sales are less than expected, there is only one way to keep profits high – cut expenses or raise prices.
Neither of those options is healthy in the long term, unless you a monopoly that can name your own price without impacting demand. Nope, the decline in revenues is a warning sign that should be heeded by any investor or trader.
For Earnings Players the clues in the early part of earnings reporting season provide a clear path to companies seeing profit destruction. That profit destruction ultimately leads to valuation destruction.
For traders anticipating that destruction, the profit potential is very real and very significant. In the case of companies likely missing earnings or revenue estimates, the best way to exploit such an event is with put options.
Earnings Players, buy those options right before the company reports and then after the news is released and the market over-reacts as it usually does the trade is closed. Triple digit gains are not uncommon.
What is needed then is to identify the companies that are headed for disaster.
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Here are 5 companies reporting results in December that are likely to be the biggest losers: