7 Reasons to Worry About Next Week

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It's easy to be upbeat these days. Stocks have primarily rallied since mid-March. This week found both Warren Buffett and Fed chief Ben Bernanke calling a bottom on the economy.

I'm not entirely convinced. Despite all of the turnaround chatter, several earnings reports due next week may justify a market pullback. 

Let's go over a few of the blue chips and seemingly recession-proof companies expecting dire tidings next week. Some of the names may surprise you:

Company	Latest Quarter EPS (Estimated)	Year-Ago Quarter EPS
Carnival (NYSE: CCL)	$1.18	$1.65
Cintas (Nasdaq: CTAS)	$0.39	$0.51
Paychex (Nasdaq: PAYX)	$0.34	$0.41
Red Hat (NYSE: RHT)	$0.15	$0.22
Finish Line (Nasdaq: FINL)	$0.20	$0.27
Steelcase (NYSE: SCS)	$0.01	$0.28
Vail Resorts (NYSE: MTN)	($1.09)	($0.29)

Source: Yahoo! Finance.

Clearing the table
We'll start with Carnival. The leading cruise line isn't a logical winner. The travel industry has been slammed, and cruising companies have turned to heavy discounting to fill up their ships. However, energy is a major component of the industry's cost structure, and fuel prices are much lower than they were during last summer's feeding frenzy. That's helping to keep the bottom-line damage to a minimum.

Cintas is another logical loser. When you specialize in corporate uniforms and other company goodies, business ought to fall as unemployment spikes. The company's keeping its chin up anyway. "We have grown 39 consecutive years, through all economic cycles," promises Cintas' investor-relations landing page. That streak is probably toast this year.

Paychex falls into the same camp as Cintas when it comes to expectations. If companies lay people off, payroll requirements should also diminish. Then again, Paychex is a cash flow beast, boosting its dividend with reasonable consistency over the years. It's been around since 1971, so it has experience in coping with the economic lulls.

Red Hat is cashing in on the open-source Linux platform. Enterprise software is a dicey sector in this climate, but Red Hat's subscription plans offers Linux-flavored solutions that are typically cheaper than conventional offerings. In short, companies cutting costs may turn to Red Hat. The company has prospered in this environment, as revenue and earnings inched higher in its most recent quarter. Alas, analysts think the speed bumps start now.

Retailers aren't doing so well, but footwear should be somewhat different. We can lay off chasing the latest fashions when pocket change is tight, but shoes with holes are another story entirely. Shoe seller Finish Line impresses with its clean balance sheet in a typically leveraged sector.

Steelcase sells office furniture. This is an easy industry to sidestep until companies begin hiring again -- but have you seen the projected carnage? Wall Street sees Steelcase posting a profit of just $0.01 a share, after ringing up $0.28 a share in earnings a year earlier.

Finally, we have Vail Resorts. Analysts see a much sharper deficit this year during the ski lodges' seasonal lull. Most companies have been trimming overhead, which should reflect kindly during the slow quarters. Apparently, that's not happening at Vail Resorts this time.

Why the long face, short-seller?
These reports probably won't be pretty -- especially since many of these stocks are market darlings in seemingly healthy sectors. If there's any silver lining, it's that investors are already braced for the worst, and that lower profitability is already baked into next week's reports. This pessimism could actually open the door for unexpected surprises.

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