5 Reasons to Worry About Next Week

The economy is showing signs of fumbling the recovery.

For the first time in seven months, the Conference Board Leading Economic Index declined in March. Another problematic report shows new claims for unemployment benefits are on the rise.

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

Apple (NASDAQ: AAPL  )

$10.13

$12.30

Cliffs Natural Resources (NYSE: CLF  )

$0.32

$0.85

Corning (NYSE: GLW  )

$0.24

$0.30

SUPERVALU (NYSE: SVU  )

$0.18

$0.38

Linn Energy (NASDAQ: LINE  )

$0.24

$0.25

Source: Thomson Reuters.

Clearing the table
Let's start at the top with Apple. All eyes are on the consumer tech giant after it hit another new 52-week low yesterday. Apple's margins are contracting as shoppers continue to choose cheaper iPad mini tablets and older iPhone smartphones over its higher-priced new models.

Revenue is still growing at Apple, but narrowing margins should result in a significant drop in profitability in Tuesday's report.

Cliffs Natural Resources has seen better days. The iron-ore miner announced last month that it was halting production at a Canadian iron-ore pellet plan, and that was followed a few days later by Morgan Stanley and Credit Suisse slashing their price targets for the stock.

Cliffs has been one of this year's biggest losers, shedding nearly 55% of its value. It doesn't help when you've missed on the bottom line in each of the past four quarters.

Corning is another company heading the wrong way on the bottom line. Analysts see the global leader in specialty glass and ceramics posting mixed results with revenue inching up slightly, but net income taking a hit.

Yes, Corning's Gorilla Glass is a hot product for smartphone makers, but you can probably imagine that Corning isn't selling a lot of PC monitors and LCD television screens these days.

SUPERVALU is the troubled supermarket operator that recently closed on a $3.3 million deal for five of its grocery store chains. Naturally, SUPERVALU will be a smaller player now, but the deal itself didn't close until late March. There are other factors weighing on the retailer's margins. Supermarkets operate on thin markups, and it's not always easy to pass on price increases to shoppers when warehouse clubs and discount department stores continue to ramp up their grocery offerings. 

Finally, we have Linn Energy. Linn is one of the country's largest independent oil and natural gas developers. This is the most likely of the five companies to actually post a year-over-year increase in profitability next week. For starters, analysts are only banking on a minor dip in profitability. They see Linn earning $0.24 a share after posting a profit of $0.25 a share a year earlier. Another thing working in its favor is that it has beaten Wall Street's profit projections in back-to-back quarters heading into Thursday's report.

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.

More on Corning
With the explosive growth of smartphones worldwide, many investors thought they would ride Corning's dominant cover glass to massive investment returns. That hasn't played out yet, as mobile growth has failed to offset declines in the company's core business. In this premium research report on Corning, our analyst walks through the business, as well as the key opportunities and risks facing it today. Click here to claim your copy.


Read/Post Comments (7) | Recommend This Article (4)

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 April 19, 2013, at 6:20 PM, tkell31 wrote:

    I would stay worried. Apple has a collision course with $300 unless Cook ever deems the shareholders worthy of news about his cash allocation plans. Or maybe the quarter is so bad they dont feel confident enough to raise the dividend. Eps will be around $8.50...around a 30% drop yoy. In that context the drop in price makes sense.

    So let the share price slaughter continue. Very real chance it could be $350 by the end of next week. Enjoy.

  • Report this Comment On April 19, 2013, at 7:33 PM, bluleo70 wrote:

    My opinion on Corning:

    I am not an investor. Heck Im not even investment literate. However even I can see why Corning might take a hit on returns just for the simple fact they offer a product that is indestructible! If a company is counting on increasing its value by offering a product that doesnt need replacing, the only opportunity that company has to increase its value is from the new customer. The older customer doesnt need your Gorilla Glass product anymore because its INDESTRUCTIBLE! Therefore less return customer traffic for the same product.

  • Report this Comment On April 19, 2013, at 9:45 PM, H3D wrote:

    "Yes, Corning's Gorilla Glass is a hot product for smartphone makers, but you can probably imagine that Corning isn't selling a lot of PC monitors and LCD television screens these days."

    Corning never did sell monitors or televisions.

    Do try to keep up.

  • Report this Comment On April 19, 2013, at 11:53 PM, tychicum wrote:

    Tkell31 ... You sound a little bitter. Since Tim took the reigns at Apple he doubled the share price in a year. Not too shabby. HP lost a couple CEOs in the same time ... And set record lows.

    Yes the stock has slid a bit since.

    There has been a concerted hate everything Apple (and American) in that same time period. Samsung and Kim Jung Un have risen to power during that same period.

    Your first name wouldn't be Kim would it ...?

  • Report this Comment On April 20, 2013, at 4:13 AM, lakawak wrote:

    tkell...unless the price rises on Monday and Tuesday ahead of the earnings report, $350 will be the HIGH estimate for wher it will end up by the end of the week. LAst quarter's earnings report brought about a 15% drop in the two days after. Next week's report will be far worse so another 15% is likely.

    And it is highly doubtful those prices WILL go up on Monday and Tuesday. No one in their right mind would buy before the earnings report...even if they want to go long. In fact, I bet a lot of the sellers over the last few days were Apple execs dumping before Tuesday. Wouldn't be the first time Apple execs did a little insider trading to screw over the little guys investing in their company.

  • Report this Comment On April 20, 2013, at 4:15 AM, lakawak wrote:

    tychucum...don't embarrass yourself. You really think that the increase in the beginning and middle of 2012 was based on Tim Cook's leadership? NOTHING Apple came out with in 2012 had anything to do with Tim Cook. Let me guess...you are one of those idiots who thinks that a stock market increasing in February after a new president goes in is because of the new president's policies.

    You honestly just don't are how stupid you make yourself look as long as you think that you defending your precious Apple? So sad.

  • Report this Comment On April 20, 2013, at 11:22 PM, TMFBreakerRick wrote:

    H3D, Corning may not be selling the TVs and PC monitors itself, but its specialty glass is definitely used in both.

    http://www.corning.com/displaytechnologies/en/products/appli...

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Related Tickers

12/19/2014 4:00 PM
AAPL $111.78 Down -0.87 -0.77%
Apple CAPS Rating: ****
CLF $6.69 Up +0.50 +8.08%
Cliffs Natural Res… CAPS Rating: ***
GLW $22.66 Up +0.48 +2.16%
Corning CAPS Rating: *****
LINE $12.24 Up +0.26 +2.17%
Linn Energy, LLC CAPS Rating: ****
SVU $9.43 Down -0.06 -0.63%
Supervalu CAPS Rating: ***

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