7 Reasons to Worry About Next Week

The Commerce Department had some good news to share this morning, bumping the economy's fourth-quarter growth rate from 5.7% up to 5.9%. Few expect things to continue at that pace, but it's at least refreshing to see a higher revision.

You won't see me doing the GDP happy dance on the streets, though.

My concerns have nothing to do with its sustainability going forward. I'm actually looking back, finding many companies that stumbled during those same three months.

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

Company

Latest Quarter EPS (Estimated)

Year-Ago Quarter EPS

NutriSystem (Nasdaq: NTRI  )

$0.13

$0.16

Edison International (NYSE: EIX  )

$0.41

$0.66

Joy Global (Nasdaq: JOYG  )

$0.64

$0.83

PetSmart (Nasdaq: PETM  )

$0.56

$0.62

SINA (Nasdaq: SINA  )

$0.36

$0.49

Del Monte Foods (NYSE: DLM  )

$0.21

$0.30

Aircastle (NYSE: AYR  )

$0.30

$0.32

Source: Yahoo Finance.

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

Let's start with NutriSystem. The weight-loss specialist may have as attractive a balance sheet as the "after" snapshots of satisfied customers, but earnings growth isn't on the menu. Analysts believe that this will be the ninth consecutive quarter of year-over-year dips on the bottom line.

Edison International is the California electricity provider. Aren't utilities supposed to be steady growers? Income investors flock to electric companies for the healthy dividends and predictable earnings power. Edison's yield of 3.8% isn't in danger, but it may become a concern if the company's bottom line doesn't turn itself around.

Joy Global posted healthy results for fiscal 2009 just two months ago, but the mining equipment manufacturer is leaving a lump of coal for investors as it kicks off fiscal 2010. We're living in a global economy where developing nations should be stirring healthy demand for commodities. This should be Joy Global's playground, though it's apparently taking a breather next week.

PetSmart is the pet supplies superstore chain. This is typically seen as a recession-resistant industry, because even cash-strapped owners aren't going to neglect their cuddly canines or fancy felines. Well, this quarter may be one for the dogs.

SINA is a new media giant in China. It was one of the original Chinese dot-coms, soaring nearly a decade ago. However, even China is apparently susceptible to a slowdown in online advertising. Analysts are predicting a 26.5% quarterly profit decline.

Del Monte Foods makes namesake and private label canned fruit products. It also has a healthy pet food business through familiar brands including Meow Mix and Milk Bone. The food giant is targeting 7% to 9% in long-term earnings growth, but it's unlikely to live up to that long-range goal with next week's report.

Finally, we have Aircastle. Fellow Fool Matt Koppenheffer recently highlighted the leased aircraft provider, warming up to its 25% long-term projected growth rate and its 5-star rating in Motley Fool CAPS. Of the seven stocks in this list, it's the one with the smallest expected profitability decline next week, but a baby step back is a long way away from that 25% long-term growth target.

Why the long face, short seller?
These reports aren't likely to be pretty. Many of these stocks are in seemingly healthy sectors, to boot. A pet supplies retailer and a pet food maker that need to be shuttled off to the veterinarian? An online rock star in China going in reverse? This isn't going to be a pretty quarter, no matter how high you fly on that Aircastle-leased jet.

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. It actually opens the door for unexpected surprises.

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

PetSmart and SINA are Motley Fool Stock Advisor picks. Try any of our Foolish newsletter services, free for 30 days.

Longtime Fool contributor Rick Munarriz wonders if his contrarian heart will ever be happy. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


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