5 Reasons to Worry About Next Week

The economy is showing signs of fumbling the recovery.

Sure, the Dow is rocking at all-time highs. The Dow has rattled off 10 consecutive trading days of gains, and you have to go all the way back to 1996 to find the last time that the Dow had that kind of winning streak. However, everything isn't as rosy as the new highs suggest. Analysts have been trimming their profit targets on many leading companies, and let's not get started on the record number of people on food stamps at a time when unemployment is supposedly at a multi-year low.

The news isn't just iffy on the macro level. There are also 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

Darden Restaurants (NYSE: DRI  )

$1.01

$1.25

Insmed (NASDAQ: INSM  )

($0.33)

($0.30)

Adobe Software (NASDAQ: ADBE  )

$0.31

$0.57

TIBCO Software (NASDAQ: TIBX  )

$0.18

$0.20

Tiffany (NYSE: TIF  )

$1.36

$1.39

Source: Thomson Reuters.

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

The Darden name may not ring a bell, but some of its chains will be all too familiar. Darden is the company behind Olive Garden, LongHorn Steakhouse, and Red Lobster. Some of its smaller faster growing chains are the Caribbean themed Bahama Breeze, and the health-conscious Seasons 52.

Given Darden's wide range of properties, it's typically a good gauge for casual dining, in general.

Investors are already braced for a soft report. Darden warned last month that traffic to its restaurants was suffering as a result of a spike in gas prices and the payroll tax hike that kicked in this year. Darden forecasted a decline of 4.5% in comps at its three flagship chains just a couple of days before the period came to an end.

Insmed will kick off the week with its quarterly financials on Monday morning.

Insmed is a biotech that's keying in on inhaled therapies for orphan lung diseases. Biotechs in the early stage are rarely profitable. It takes years to get drugs through the regulatory pipeline, and most treatments fall short before they make it to the finish line.

Insmed's has treatments in late stage clinical trials, with important findings expected later this year. The losses will naturally continue along the way, though investors would prefer to see Insmed's losses narrow instead of expand.

Adobe is the desktop publishing giant that always seems to nag you about that Flash update that you've been meaning to get around to. From Photoshop to Acrobat, Adobe helps tech-savvy content creators and developers author presentations.

This would seem like a steady niche, but free and nearly-free websites and apps have eaten into the low-end of Adobe's business. Analysts see revenue and earnings declining when it reports on Tuesday.

TIBCO Software is a provider of enterprise software solutions. TIBCO's tibbr platform offers closed social networking for corporations, and its Spotfire offering provides data visualization and predictive analytics.

TIBCO was a steady grower on the bottom line, even during the darkest recessionary stretches. This is shaping up to be the first time that TIBCO posts a year-over-year decline in earnings per share since 2007.

Finally, we have Tiffany. The upscale jeweler is expected to post a small dip in profitability, as sales inch higher.

It's hard to be too confident in the $1.36 a share that Wall Street is projecting for Tiffany's holiday quarter. This is a company that has come short on the bottom line every single time over the past year.

We've had mixed holiday results from luxury brands, so investors will just have to assume that the problematic trend will continue until Tiffany snaps the unwelcome streak of four straight disappointing quarters.

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 translates 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.

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