7 Reasons to Worry About Next Week

"Thank God 2011 is almost over," must've been a popular prayer yesterday.

Between the problematic unemployment rates, global economic calamity, and the volatile year that the stock market has been having, maybe it's a good thing we're weeks away from 2012.

Things aren't pretty out there. Just wait until you hear what corporate America has to say next week.

There are still plenty of companies posting lower earnings than they did a year ago. Let's go over a few of the names that are expected to go the wrong way on the bottom line next week.

Company

Latest Quarter EPS (estimated)

Year-Ago Quarter EPS

My

Watchlist

OmniVision (Nasdaq: OVTI  ) $0.32 $0.58 Add
Aeropostale (NYSE: ARO  ) $0.28 $0.67 Add
Coldwater Creek (Nasdaq: CWTR  ) ($0.33) ($0.12) Add
Seadrill (Nasdaq: SDRL  ) $0.71 $0.79 Add
Big Lots (NYSE: BIG  ) $0.08 $0.23 Add
Avanir Pharmaceuticals (Nasdaq: AVNR  ) ($0.15) ($0.10) Add
Thor Industries (NYSE: THO  ) $0.42 $0.44 Add

Source: Thomson Reuters.

Clearing the table
Let's start at the top with OmniVision.

The maker of image sensors has had a good run lately. Laptops, smartphones, and now even tablets come with high-def cameras, and OmniVision is a major player in this space. Yes, there is life after the stand-alone digital camera for OmniVision.

The problem here is that competition is getting fierce. Investors were shocked to learn that OmniVision wasn't the only company providing camera chips on the new iPhone 4S. Lowering its already soft guidance earlier this month also isn't helping.

Aeropostale is one of the many retailers expected to post declining profitability in its latest quarter. This certainly isn't the market recovery that many optimists had drawn up. If things aren't going well at the mall heading into the holiday shopping season, maybe that's another reason to close our eyes and wait until 2012 rolls around.

Coldwater Creek is a retailer of women's apparel and home furnishings through mail-order catalogs, retail stores, and its website. Coldwater has been a mess since it began opening mall stores to accentuate its direct-mail business. It was losing money before, and now it's losing more money.

Seadrill is a Bermuda-based offshore drilling contractor for the gas and oil industry. It has dozens of rigs ready for shallow or deepwater assignments. The recently percolating crude oil prices may keep Seadrill busy, but analysts see slightly lower earnings this time. A saving grace for Seadrill is that it has managed to land ahead of Wall Street's profit targets in each of the three previous quarters.

Big Lots runs superstores that specialize in manufacturer overstocks and clearance items. They buy distressed or out-of-favor merchandise in "big lots," see? This would seem like a no-brainer retail winner now that consumers want to stretch their greenbacks. To be fair, Wall Street does see a modest 6% uptick in net sales here. The rub here is that Big Lots isn't keeping its margins in line.

Avanir's Nuedexta treats a symptom -- uncontrollable outbursts of crying or laughing -- of more serious neurological diseases. Avanir hasn't had much initial success in marketing Nuedexta profitably, and that's leading to widening deficits.

Finally, we have Thor Industries, a maker of RVs. The stock popped higher after its most recent quarterly report two months ago, but even better-than-expected results then still meant a year-over-year decline in profitability. Motor homes aren't easy sells in a weak economy, and oil now bumping up against $100 isn't going to make selling a house on wheels any easier.

Why the long face, short-seller?
These companies have seen better days. The market has rewarded many of these stocks with reasonable gains over the past year, but they still haven't earned those upticks.

The good news here is that Wall Street already expects these companies to deliver shrinking bottom lines. In other words, the bad news is already baked into the shares.

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

How do you think these stocks will fare when they report next week? Share your thoughts in the comment box below.

The Motley Fool owns shares of Aeropostale. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.


Read/Post Comments (3) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 25, 2011, at 10:08 AM, dontwin wrote:

    With over 90% of their rigs under contract, why should SDRL earnings go down? Have to see it to believe it!

  • Report this Comment On November 27, 2011, at 12:07 AM, Chontichajim wrote:

    SDRL earnings are not likely to be down for the year 2011 from 2010, just down when comparing next weeks quarter end.

    What kept it on my watchlist was after restarting their dividend in 2009 they have gotten too aggresive and it now exceeds the EPS (0.75 vs 0.71). With their high debt I don't see how it can exceed earnings for long. Better to bring the dividend up more slowly. Nothing hurts the stock price worse than the inevitable dividend cut.

  • Report this Comment On November 28, 2011, at 7:13 AM, BernieSr63 wrote:

    A change of subject, if you don't mind. Thanks...

    I've seen many press releases RE: dividends on REITs. I've been getting some heavy payouts and I keep hearing that they are HIGH risk investments. Does it all hinge on when the FED raises the interest rates? It seems to me that the interest being charged on the subsequent mortgages would still leave the trusts with sufficient revenue to maintain their payouts and thrive. Some of them have multi-billion Market Caps and cash to cover their moats and their dividends. If worse comes to worst wouldn't they just reduce their payouts?

    Help with some valuable, expensive information/opinions, Please

    Kwikie

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