Among the biggest losers in Monday’s early trading are California Pizza Kitchen (Nasdaq: CPKI), Ralcorp (NYSE: RAH) and BP (NYSE: BP).

A Bad Time for a Sales Slowdown

Shares of California Pizza Kitchen (Nasdaq: CPKI) are slumping neary -10% after noting early Monday morning that May sales trends were sharply negative, pushing down second-quarter sales and earnings guidance. The company notes that May 2009 sales trends were notably strong thanks to a promotion, so a -7% drop in May 2010 results may not be as bad as appeared. Of course, heavy promotions can really eat into profits, which is why companies don’t like to run them. It’s not a good sign that CPKI is still seeing negative sales trends this far into an economic rebound.

Shares would have fallen further on Monday were it not for an announcement two months ago that the company was seeking “strategic alternatives,” which is the equivalent of hanging a “for sale sign” out for any potential buyers. But the weak sales picture would complicate any discussion, and perhaps lead to a lower purchase price.

Action to Take –> The entire restaurant sector is struggling for growth right now. And until we get more robust declines in the unemployment rate (which looks increasingly unlikely for this year), then sales and profits will remain subpar. The key is to find names that are especially cheap on a price-to-earnings ratio (P/E) basis, even in this depressed environment. CPKI isn’t cheap, especially accounting for today’s pre-announcement. If shares fell below $15, they’d be much tastier.

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It could have been Worse

Ralcorp (NYSE: RAH) announced a second-quarter shortfall on Monday and a major acquisition on Monday, and both factors should have hit shares pretty hard. The fact that this maker of private-label foods and the Post cereal brand is only off -7% in Monday trading should be seen as a real plus.

Ralcorp now expects to earn around $1 a share in the current quarter, well below the $1.29 a share that analysts had been expecting. For many years, investors enjoyed playing the private-label stocks, which were clear beneficiaries of a trend for supermarket chains to stack more of their own brands. The private label category is still growing at a modest pace, but competition is more intense than ever, and Ralcorp appears to be losing some market share. The company is also struggling with its Post cereal line, which is its only major branded offering.

To fight off top-line fatigue, the company just announced plans to acquire American Italian Pasta (Nasdaq: AIPC) for a hefty $1.2 billion. Shares of AIPC, which is the leading purveyor of supermarket-branded pasta, are up more than +25% in Monday trading. Despite that high premium, Ralcorp belies the deal will still add $0.50 to annual earnings-per-share (EPS) right away. And that explains why shares aren’t falling further today. Nevertheless, the EPS boost from the deal won’t be enough to counter the EPS drag seen from slowing cereal sales.

Action to Take –> The deal helps support a flagging bottom line, but it’s hard to deny that this is a company with limited organic top-line growth prospects. Ralcorp throws off considerable cash flow, but with shares rising more than +300% in the last two years, it’s hard to see any further upside in this name.

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BP: the Hits keep Coming

Shares of BP (NYSE: BP) are off nearly -3% on Monday, near a 13-year low, even as the rest of the market is showing a solid Yuan-related bounce. Reports are circulating that the oil giant will raise $50 billion to cover expenses in the Gulf of Mexico. How it raises that money will be crucial. To the extent that BP can increase its borrowings, even if it needs to pledge assets for loans, should have a negligible long-term impact on shares, as prodigious cash flow will allow that debt to be re-paid within a few years. But if BP issues more stock or sells off assets, then its future per-share earnings power will be diminished.

Action to Take –> BP’s recent decision to suspend its dividend is a clear positive. As we noted in this piece shares will find support once the extent of the company’s liabilities have been established, and investors once again focus on the company’s massive annual cash flow. Thus far, we have no reason to change our view that the size of the liabilities won’t be so large as to imperil the company, but asset sales and any potential dilution from stock sales diminishes the long-term cash flow strength (at least on a per-share basis). Shares, at $30, still appear far too cheap, despite the company’s litany of missteps.