Recent earnings news from

Solectron

(SLR)

and

FedEx

(FDX) - Get Report

caused my inbox to fill up quickly overnight. I've received a flurry of emails asking for my thoughts on these companies, so here's a quick look at both.

Strikes Against Solectron

Solectron, an electronic-parts contractor based in Milpitas, Calif.,

missed first-quarter estimates by 3 cents a share, reporting a per-share loss of 8 cents Tuesday. The company also guided down its second-quarter forecast to between break-even and 3 cents a share, and it outlined a $1.5 billion financing package to meet its near-term debt obligations.

So what's an investor to do? Steer clear of it. These guys have too many strikes against them.

  • Standard & Poor's recently cut its rating on Solectron's debt.
  • Capacity utilization was a mere 50% in its recent fiscal first quarter.
  • Competition is stiff and demand remains weak.
  • Although management lowered second-quarter guidance, I don't think it has a clear idea when its business will pick up.
  • In the days ahead, the sell side will certainly publish lots of negative research reports on the company -- and tell their big clients to bail. Many funds that own this stock will also undoubtedly sell for window-dressing purposes.

Bottom line: Hold off on this one. My bet is that you'll be able to buy it with a much cheaper price tag a few weeks down the road.

FedEx Gets a Special Package

On the other hand, FedEx handily beat analyst estimates for its second quarter, reporting net income of 81 cents a share Wednesday. The consensus estimate had been 64 cents a share for the Memphis, Tenn.-based parent of Federal Express. The company also predicted lower third-quarter earnings before growth resumes in the fourth quarter.

I love this company. I think it's a winner over the long haul, but look closely at these second-quarter numbers. Buried in the press release is the fact that 24 cents of its 81 cents in per-share earnings came from a one-time gain, thanks to the Air Transportation Safety and System Stabilization Act.

I also dislike management's minimizing of expectations for the third quarter, which it's doing. The company's per-share guidance for that period is now 25 cents to 35 cents, down from the year-ago 37 cents. The consensus estimate for the third quarter stands at 35 cents.

Management also suggested a trend toward lower package volume in the third quarter, which isn't something to cheer about. Although I know of no set figure the company had previously forecast for volume, I gather that the slowdown came as a bit of a surprise, even to FedEx.

But I do like the company's repurchase of 550,000 shares in the second quarter, although I'm not convinced that was the best use for its cash. With the stock trading at or near its 52-week high and a rather cloudy near-term outlook, I think FedEx might be better off stashing that dough under the mattress.

Lastly, I'm a bit concerned that top managers have provided a relatively upbeat view for investors, but they haven't stepped up to the plate individually and bought shares themselves.

Bottom line: Wait for a pullback, then jump in.

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In keeping with TSC's editorial policy, Glenn Curtis doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. Curtis welcomes your feedback and invites you to send it to

Glenn Curtis.