5 Reasons to Worry About Next Week

The economy is showing signs of fumbling the recovery.

Sure, the unemployment finally fell below 8%. This morning's tally of 7.8% for the month of September is a welcome surprise. However, everyone knows that the unemployment rate is only telling part of the story. There are still too many people out there that have given up looking for work.

It's not just a mess at the macro level. There's also plenty of uninspiring news at the company level. There are more than a few companies that aren't pulling their own weight in this supposed economic recovery.

There are still plenty of names posting lower earnings than they did a year ago. Let's go over a few of the companies 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

Alcoa (NYSE: AA  )

$0.01

$0.15

Add

ADTRAN  (Nasdaq: ADTN  )

$0.20

$0.56

Add

API Technologies (Nasdaq: ATNY  )

($0.01)

$0.04

Add

Source: Thomson Reuters.

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

The aluminum producer has seen better days. Analysts see Alcoa squeezing out a meager profit of $0.01 a share, well off the $0.15 a share it posted a year earlier. Wall Street's also looking for a 13% decline in revenue, so this isn't just a matter of margins not playing along.

Yes, Alcoa is coming off of back-to-back quarters of better-than-expected profitability. This is the kind of trend that suggests that Alcoa may earn more than $0.01 a share. However, it's not likely to land anywhere close to last year's profitability.

ADTRAN is also expected to post lower profitability. UBS downgraded the shares yesterday -- from buy to neutral, and slapping on a lower price target of $17 -- shortly after the company hosed down its near-term outlook.

The provider of networking and communications equipment warned in a regulatory filing that its revenue in its fourth quarter -- the period that just began -- is likely to decline sequentially compared to the third-quarter results that it will post next Wednesday.

In other words, as bad as Q3 may be, things aren't going to get better.

We also have API Technologies reporting. The provider of RF/microwave, microelectronics, and security solutions broke even a year ago, but analysts are eyeing a small quarterly deficit this time around.

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. Lower earnings translate into higher earnings multiples, and nobody wants to see that happen.

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.

Beyond the companies
However, it's not just about corporate America's quarterly reports. Three companies reporting lower earnings shouldn't be the end of your fretting.

If you want a fourth reason to worry, consider the wave of economic data that the Labor Department will be releasing the Producer Price Index for September. What if it's too high? What if inflation is starting to poke its head out? What would that do to the low interest rates that are apparently necessary to keep the economy humming?

If you crave a fifth reason to get nervous, check out Liberty Media's (Nasdaq: LMCA  ) annual investor meeting on Wednesday. The media conglomerate has been a solid performer, but there's bound to be tension in the air when Sirius XM Radio (Nasdaq: SIRI  ) CEO Mel Karmazin presents. He was invited to speak at the event, even though Karmazin and Liberty Media CEO Greg Maffei have had a war of words concerning Karmazin's role at Sirius XM. whose contract expires at the end of the year. Karmazin isn't afraid to speak his mind, so it will be interesting.

One more reason
If five reasons to worry aren't enough, let's make your future No.6. There's a single shocking truth about your retirement that you may not know. It's part of a free report that won't be around forever, so click here to check it out.

Rick Aristotle Munarriz owns shares of Liberty Media. The Motley Fool has no positions in the stocks mentioned above. 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.


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  • Report this Comment On October 05, 2012, at 7:35 PM, JamesRobertDobbs wrote:

    "However, everyone knows that the unemployment rate is only telling part of the story. There are still too many people out there that have given up looking for work."

    Boilerplate Republican nonsense, hauled out whenever their Least Favorite President accomplishes something.

    Did you bother to actually research this month's jobs report? Nearly every news article specifically mentions that with this report, the number of people participating in the labor force rose slightly in September, meaning the dip in unemployment wasn't driven by frustrated workers exiting the labor force altogether because they couldn't find a job.

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