After years of flourishing, some of America’s largest public corporations have stopped growing. In several cases, this trend began years ago.
The companies that cannot grow fall into two categories. The first are those that due primarily to mismanagement have lost sales and been battered by superior competition. The second are companies that may have good management but operate in industries saturated by competition and industries that are no longer growing rapidly — sometimes even shrinking. In both cases, many of these corporations are expected to do little better in the next year or longer, at least as far as revenue growth is concerned.
Among companies that are poorly managed is Sears Holdings. It has allowed itself to be flanked by two sets of competition. The first is big-box retailers, including Walmart. The second is online retailers, primarily Amazon.com. Sears does not have much of an excuse for its stagnant growth. It began to operate stores in 1925, giving it a decades long head start in the industry.
Among companies that are relatively well managed but boxed in by the lack of growth in their markets are defense contractors Lockheed Martin and General Dynamics. Each relies heavily on the federal government for its sales. As some projects are completed, their revenue contribution naturally falls and is sometimes replaced by new projects. That cycle is not a recipe for rapid top line growth. As Congress begins austerity measures, it is certain that defense projects will be cut, which leaves the defense contractors in a difficult position if they wish to add sales in the next several years.
Some large companies try to make up for their lack of revenue growth by offering investors other means of returns. These are primarily in the form of share buybacks or dividend increases. Among the companies analyzed here, AT&T has the highest dividend. Its current yield is nearly 5%. General Dynamics’ yield is 3.3% and Lockheed Martin’s is 4.8%.
The financial press often focuses these days on rapidly growing companies such as Google, Apple and Amazon. But there is a group of huge corporations that have not, and may not ever again, post any substantial increase in sales.
Based on data provided by Capital IQ, 24/7 Wall St. identified the largest companies that will not grow. In order to be considered, companies had to be among the 100 largest companies by sales, based on their most recent fiscal year. To qualify, companies had to have sales growth of 3% or less over the most recent one-year, three-year and five-year periods. Additionally, all companies had consensus growth estimates of less than 3% for 2013. Companies with any significant M & A activity were excluded. Company filings submitted to the Securities and Exchange Commission and data from Morningstar were also considered.
These are the famous companies that will not get bigger.