7 Reasons to Worry About Next Week

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Is it just me, or are the market's knees appearing a little wobbly these days?

Maybe it's the weight of the rally-fueled gains since mid-March. Maybe it's the huge chip on the market's shoulder after it debunked the "sell in May and go away" axiom.

Either way, the market is ripe for a breather. As fate would have it, several earnings reports due up next week may justify a market pullback. 

Let's go over a few of the blue chips and seemingly recession-proof companies for which analysts see the arrows pointing down on the bottom line next week. Some of the names may surprise you.

Company	Latest Quarter's EPS (Estimated)	Year-Ago Quarter's EPS
AeroVironment (Nasdaq: AVAV)	$0.13	$0.22
Smithfield Foods (NYSE: SFD)	($0.55)	($0.17)
Men's Wearhouse (NYSE: MW)	$0.61	$0.72
Shuffle Master (Nasdaq: SHFL)	$0.07	$0.11
Hooker Furniture (Nasdaq: HOFT)	$0.07	$0.17
lululemon athletica (Nasdaq: LULU)	$0.10	$0.18
Xinyuan Real Estate (NYSE: XIN)	$0.05	$0.16

Source: Yahoo! Finance.

Clearing the table
Several companies will post lower earnings next week, but these are just a few of the names that really jump out at me.

Let's start with AeroVironment. The company makes unmanned flying vehicles, but we're not talking about the remote-controlled helicopter toys you grew up with. These are high-tech devices that aid the military in snooping on the other side. The flying machines are cool, but the company's financials haven't been. After a smoking-hot start on the heels of its 2007 IPO, AeroVironment is now targeted to post a dip in year-over-year profitability for the third quarter in a row.

Smithfield isn't bringing home the bacon. The pork giant is expected to post a widening deficit on Tuesday. Remember when investors considered food companies to be defensive plays because people always have to eat? Well, Smithfield's report is likely to be more offensive than defensive.

Men's Wearhouse is a surprising name to see here. Retailers aren't doing well in general, but this chain specializes in affordably priced suits. Given all of the corporate layoffs, I would have expected to see more people dressing for success in their job interviews.

Shuffle Master makes automatic card shufflers and other casino gadgetry. As more states turn to legalizing gambling to offset budgetary shortfalls, Shuffle Master should be doing well. But analysts don't see it that way. Decks get cut in half, and so will the company's quarterly earnings. 

Hooker Furniture is another surprising sinker. Sure, furniture sales are crummy all over, but the company relies on imports. As the dollar strengthened during the quarter, it should have helped the company by making its purchases cheaper and improving margins.

It seems only yesterday that lululemon athletica was a mall darling, as well-to-do soccer moms lined up to buy designer yoga wear. However, lululemon is shaping up a lot like AeroVironment. Both companies went public in 2007, and both will have posted year-over-year declines three straight quarters.

Finally, we have Xinyuan Real Estate. Property management and real estate development aren't scintillating industries right now here in the U.S., but this company is in Beijing. More to the point, some publicly traded companies are thriving in China's booming real estate market. Xinyuan, however, isn't going along for the ride.

Why the long face, short seller?
Many of these stocks are market darlings in seemingly healthy sectors. A defense contractor that spares lives is somehow out of fiscal favor? A Chinese real estate play is crashing the house party? This isn't going to be an attractive quarter, no matter how flattering that lululemon athletica outfit is.  

There is a silver lining, though. Investors are already braced for the worst with these reports. If there is an upside to this grim list, it's that lower profitability is already baked into next week's reports. The door is open for unexpected surprises.

The more I think about it, the less worried I become.

Some other reads to get you through the weekend:

• Where Does the Market Go From Here?
• How You Can Get Rich With 4 Dumb Mistakes
• You'd Be Stupid to Buy These Stocks