5 Reasons to Worry About Next Week

The economy is showing signs of fumbling the recovery.

Sure, the housing market is rocking these days. The National Association of Realtors chimed in this week with encouraging news on that front. Sales of existing single-family homes are at their highest level in more than three years. Folks are also paying more for their new digs. The median sales price of $173,600 is 12% ahead of where things were a year earlier.

However, what happens when mortgage rates move higher? What happens when more people start freaking out about what's happening in Cyprus?

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

JA Solar (NASDAQ: JASO  )

($1.53)

($0.55)

Apollo Group (NASDAQ: APOL  )

$0.18

$0.58

AuRico Gold (NYSE: AUQ  )

$0.05

$0.15

Mattress Firm (NASDAQ: MFRM  )

$0.32

$0.63

BlackBerry (NASDAQ: BBRY  )

($0.32)

$0.80

Source: Thomson Reuters.

Clearing the table
Let's start at the top with JA Solar.

Solar energy has been a cloudy industry lately. No one will dispute the merits of power harnessed from the sun, but at a time when global economies are still wobbly, the government incentives to subsidize costly solar panel installations have been hard to come by.

Things got even worse this week as the main subsidiary of industry bellwether Suntech Power filed for bankruptcy in China.

JA Solar has struggled. After a profitable run during solar's heyday, the company has cranked out six consecutive quarterly deficits. It's not going to get any brighter next week. Wall Street's betting on JA Solar posting its largest quarterly deficit to date.

Apollo Group is the company behind the virtual University of Phoenix campus.

For-profit secondary educators have come under fire in recent years. Crummy student loan repayment rates and arguments about the effectiveness of online education when pitted against traditional colleges have stung enrollment rates and consumer perceptions.

Apollo's most recent quarter was a dud. Revenue and operating profits slipped, and degreed enrollment at University of Phoenix declined 14% to 319,700 Web-tethered pupils.

Some will argue that this is what Apollo deserves. Before the niche fell out of favor, Apollo was coming under fire for its aggressive marketing strategies. Now that the merits of virtual classrooms are being questioned, Apollo has earned the dunce cap.

AuRico Gold reports on Monday, and Wall Street sees the Canadian gold producer earning just a third as much as it did a year earlier. Gold prices have cooled off, and the bottom line for gold miners will fluctuate wildly given the fixed costs of production as metal prices move up and down.

AuRico Gold is trying. Last month it initiated a dividend policy. The quarterly payouts of $0.04 a share may not seem like much, but it's a reasonable 2.3% yield given AuRico's low share price. At the very least, the Toronto-based miner is rewarding investors for their patience.

Mattress Firm went public at $19 less than two years ago. The stock is trading north of $30 these days, but it has also shed 37% since peaking last year.

The rise and fall of Mattress Firm has been swift. The mattress retailer was initially able to make the most of a highly fragmented industry. Consolidating retailers by acquiring smaller regional bedding chains helped pad results, but now is when the California King starts to get lumpy.

Revenue growth is still stellar, even if it's naturally not entirely organic. Margins are the problem at Mattress Firm, and the pros see profitability nearly cut in half this time around.

Finally, we have BlackBerry. The smarpthone pioneer is generating plenty of buzz today as its new Z10 handset is finally available domestically. However, BlackBerry's been struggling to grow its user base since peaking at 80 million worldwide accounts last year. Wall Street's banking on a significant quarterly loss when it reports on Thursday.

If the new BlackBerry 10 mobile operating system takes off this year, it's easy to see the company's fortunes turning around, but it's hard to compete with the open-source beast that Android has become in a global marketplace where price and developer support reign supreme.

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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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 March 22, 2013, at 12:12 PM, Oril wrote:

    Wow you are really working overtime cranking out your bullshet articles today. Cover your blackberry shorts now while you can before your broker does it for you and cleans out your account in the process after blackberry releases its report next week.

  • Report this Comment On March 22, 2013, at 1:05 PM, Oril wrote:

    It seems that Apple has much of its cash assets hidden in offshore accounts in order to avoid paying US taxes.

    Hmm, I wonder how much of it may be hidden in the Cypriot banking system. If the much feared confiscation scenario plays out and/or it spreads to other European countries apple could be in for a big hit. Now may be as good a time as any to short apple and go long blackberry.

    JMO

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