Just like you never want to hear a doctor say "oops" in the operating room, you never want to see a going-concern statement in a financial report about a company you own. Accountants throw these in when they've been over the books, talked to customers, and checked the horoscopes and have concluded there is "substantial doubt" about a company's ability to remain in business. In short, don't blame the accountants if the company files for bankruptcy protection.

You¿d reckon that a going-concern statement would be enough to send investors running to the exits, but it's not. True, many large institutions automatically bail when an existing company gets slapped with one of these, but many individuals (often wrongly) take a chance they know more than the bean counters.

During the tech boom of the late 1990s, many companies actually went public even though they had been hit with going-concern statements. Many of those companies subsequently disappeared. Enough said.

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Monday, October 06, 2008

Stocks In Focus For Tuesday

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MarketWatch

SAN FRANCISCO -- Among shares expected to see active trade in Tuesday's session are those of Alcoa Inc., Safeway Inc., and Yum Brands Inc.

Alcoa Inc. (AA) is expected to report third-quarter earnings of 54 cents a share, according to analysts surveyed by FactSet Research.

Safeway Inc. (SWY) is forecast to post earnings of 48 cents a share in the third quarter.

Yum Brands Inc. (YUM) is estimated to report a profit of 54 cents a share in the third quarter.

Sealy Corp. (ZZ) is expected to report earnings of 9 cents a share in the third quarter.

Acuity Brands Inc. (AYI) is projected to post a fiscal fourth-quarter profit of $1.08 a share.

After Monday's closing bell, Bank of America Corp. (BAC) said its third-quarter profit dropped to $1.18 billion, or 15 cents a share, from $3.7 billion, or 82 cents a share, in the year-ago period. Analysts had estimated a quarterly profit of 61 cents a share. Bank of America also said that it will sell $10 billion in common shares in a secondary offering and cut its quarterly dividend by 50% to 32 cents. Nonperforming assets, such as leases and foreclosed properties rose to $13.36 billion -- or 1.42% of total loans -- for the quarter, compared with $3.37 billion, or 0.43%, in the year ago quarter. See full story

Watch list

Eli Lilly & Co. (LLY) may have its ratings lowered by Fitch Ratings following a review of the drug maker's $6.5 billion offer for ImClone Systems Inc. (IMCL) . Fitch has AA issuer default, bank loan, and senior unsecured debt ratings, and an F1+ short-term IDR on Lilly. The ratings cover about $4.61 billion in debt.