7 Reasons to Worry About Next Week

The market's been cooperating for the most part after a bearish swoon earlier this month.

Economic data this week have been mixed. On the one hand, we have another welcome decline in claims for jobless benefits. If we look back over the past few weeks, we're looking at a four-week moving average at levels last seen in 2008.

On the other hand, new orders for manufactured goods dipped last month. That's not something you typically see if we're at the cusp of economic expansion.

The same can be said for the state of individual companies. Some market darlings appear to be doing well, but there are still more than a few that aren't playing along.

Let's go over a few of the companies where analysts see the arrows pointing down on the bottom line next week when they step up with their quarterly results. Some of the names may surprise you.

Company	Latest Quarter EPS  (Estimated)	Year-Ago  Quarter EPS	My Watchlist
Cal-Maine Foods (Nasdaq: CALM  )	$1.22	$1.45	Add
Apollo Group (Nasdaq: APOL  )	$0.68	$0.84	Add
A-Power (Nasdaq: APWR  )	$0.18	$0.61	Add
Lennar (NYSE: LEN  )	($0.05)	($0.04)	Add
SORL Auto Parts (Nasdaq: SORL  )	$0.23	$0.28	Add
Conn's (Nasdaq: CONN  )	$0.02	$0.29	Add
Xyratex (Nasdaq: XRTX  )	$0.27	$0.96	Add

Source: Thomson Reuters.

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

The yolk's on Cal-Maine. The company sells its fresh shell eggs in 29 states. Lugging around delicate and time-sensitive cargo doesn't come cheap given rising fuel costs. Food companies can usually pass on those increased costs to consumers, but it doesn't seem to be working for Cal-Maine's bottom line.

Apollo Group is the for-profit educator behind the popular University of Phoenix online campus. This was an industry that seemed to rock during the recession. Enrollment grew nicely as the unemployed and cautiously employed flocked to the convenience and low cost of Web-based schooling.

Nabbing a passing grade these days hasn't been as easy. Apollo has come under fire for its aggressive marketing practices. The entire niche was crushed last year when dreadful student loan repayment rates among some industry players were revealed. There have been a few standouts bucking the recent malaise, but Apollo sadly isn't one of them.

A-Power is a Chinese leader when it comes to selling distributed power generation systems. It's also making the forward-thinking move of expanding into the production of alternative energy systems. Despite a seemingly attractive specialty in a country that is starting to come into its own, it's only pegged to earn less than a third of what it did during the same quarter a year earlier.

Lennar is a Florida-based homebuilding giant. Obviously the past few years have been rough for real estate developers, but Lennar's the one company on this list that has the best shot at posting bottom-line improvement next week.

It's not just that analysts are targeting a deficit of $0.05 a share, a smidgeon more red paint than it bled when it posted a quarterly loss of $0.04 a share during the previous year's quarter. Lennar has actually blown past Wall Street expectations over the past year.

Quarter	EPS est.	EPS	Difference
Q1 2010	($0.30)	($0.04)	87%
Q2 2010	$0.00	$0.21	NM
Q3 2010	$0.06	$0.16	167%
Q4 2010	$0.03	$0.17	467%

Source: Yahoo! Finance. NM = not meaningful.

SORL Auto Parts is a Chinese manufacturer of automotive brake systems. Just as A-Power seems like a no-brainer growth story, SORL should also be benefiting as the world's most populous nation moves from bicycles to cars to get around. The thesis holds up on the surface. Analysts see quarterly revenue climbing nearly 24% higher. It's just not trickling all the way down on the income statement.

Conn's is a regional retailer of consumer electronics. The liquidation of Circuit City two years ago wasn't the market share opportunity that remaining players thought they were getting. Weak television sales and a shift to e-tail have hurt the real-world chains. It's not just Conn's. Did you see yesterday's report out of the industry leader? Comps, revenue, and earnings all fell during Best Buy's holiday quarter. 

Finally, we have Xyratex. The enterprise storage provider is selling for a little more than half of its 52-week high at the moment. Last year's sector consolidation frenzy has moved on, and now companies are being taken to task for their financial performance.

Why the long face, short-seller?
These reports aren't likely to be pretty, but there's still room for glimmers of optimism within the pessimism.  

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.