Small-Caps Reveal Real State of Economy

BOSTON ( TheStreet) -- The largest U.S. companies, including JPMorgan ( JPM) and Intel ( INTC), are projecting better days ahead, beating analysts' expectations and helping to drive the Dow past 10,000 points for the first time in year.

But small companies, which constitute a majority of the stock market and the economy, are still suffering, suggesting investors ought to temper their bullishness after the Dow surged more than 50% since March. The following are three lesser-known companies whose profits have been decimated by weak demand. As such, they represent a real portrait of corporate America. Each reported after the close of stock-market trading yesterday.

Jacksonville, Florida-based Landstar System ( LSTR) is a transportation and logistics company. Third-quarter net income dropped 39% to $20 million and earnings per share fell 37% to 39 cents. Revenue descended 32% to $501 million.

Landstar posted a quarterly operating margin of 6.5% and a net margin of 4%. Chief Executive Officer Henry Gerkens noted that Landstar's revenue "continued to be negatively impacted by the recession in the domestic and global economies." A point of optimism: The number of loads hauled fell 11%, compared with a 16% drop in the second quarter.

Landstar's stock slumped as much as 3.3% today, putting the company in negative territory for 2009.

Stanley Furniture ( STLY) fared worse. The Virginia-based company manufactures and sells wood furniture in the upper price range. Its third-quarter net loss widened 45% to $5.1 million, or $1.01 a share, as revenue fell 29% to $38 million. The company endured a gross, operating and net loss.

CEO Albert Prillaman commented: "We believe our sales performance is indicative of consumer demand for residential wood furniture in our price segment. Demand for better goods continues to bump along at very depressed levels, and we see no signs of any near-term improvement."

Stanley Furniture, which rallied 6.6% yesterday in anticipation of the quarterly results, tumbled as much as 6.2% today. The stock is up 29% this year.

Grand Rapids, Michigan-based Spartan Stores ( SPTN) is a grocery distributor and seller. After posting higher sales for its fiscal first quarter, business dropped off a bit. Fiscal second-quarter revenue fell 3% to $610 million and profit sank 4% to 46 cents a share.

Earnings from continuing operations deteriorated 10% to $10 million. "Consumers continued to behave cautiously given the challenging economic environment, and we experienced significant price deflation in three of our high-volume product categories," CEO Dennis Eidson said.

Spartan Stores climbed 2.2% yesterday, but sank as much as 6.6% today. The company's shares have retreated 39% in 2009.

Those three companies have undiluted exposure to the U.S. economy, offering tangible products and services. But due to their small stature -- each has a market value of less than $2 billion -- they don't garner much attention from Wall Street.

They are companies that employ American workers. Managements' consensus: The economy is improving marginally, but the outlook remains bleak. Is the stock market's upward momentum merited or have we commenced the extend-and-pretend phase of this rally?

Large-cap, industry-leading companies with massive international exposure are hogging the headlines and being held up as anecdotal paradigms of our economic recovery. But small, U.S.-centric businesses are telling another story entirely. It's just been difficult to hear amid the din.

-- Reported by Jake Lynch in Boston.

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