5 Reasons to Worry About Next Week

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The economy is showing signs of fumbling the recovery.

There are too many investors taking big risks in pursuit of income, and that's dangerous. Junk bond yields dipped below 5% to set a record low. Think about that. We used to call them high-yield bonds, but that certainly doesn't seem the case at 4.97%.

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.


Latest Quarter EPS (Estimated)

Year-Ago Quarter EPS




Renren (NYSE: RENN  )



Nordic American Tankers (NYSE: NAT  )



InterOil (NYSE: IOC  )



J.C. Penney (NYSE: JCP  )



Source: Thomson Reuters.

Clearing the table
Let's start at the top with Velti. The Dublin-based mobile marketer shocked investors in its previous quarter with a steep deficit at a time when the market was banking on a healthy profit. They won't be fooled again.

Analysts see a widening loss this time around. It certainly didn't help that Velti tweaked its guidance two months ago. Velti now sees revenue of no more than $280 million this year, well off the $340 million that Wall Street was holding out for at the time.

Renren is also eyeing a widening deficit. China's leading social networking website operator isn't necessarily slipping in popularity. Trackers see revenue soaring 41% for the quarter. The problem with Renren, as investors are finding with way too many of that country's dot-com speedsters, is that margins are taking a hit as the company rolls out new monetization measures.

Nordic American Tankers has grown its fleet of crude oil-carrying double-hull Suezmax tankers from three to 21 over the past eight years. Income investors also see the company as a transporter of meaty dividends. Nordic American Tankers currently yields 7.4%.

Nordic American Tankers has already come up short on the bottom line in its two previous quarters, and that may not bode well heading into a quarterly report where analysts see a steep drop in revenue.

InterOil owns petroleum licenses covering roughly 3.9 million acres through Papua New Guinea. It also owns an oil refinery, as well as retail and commercial distribution facilities. InterOil was profitable in three of the past four quarters, but the market is braced for red ink tomorrow and for all of 2013.

Finally we have J.C. Penney. The Ron Johnson era has mercifully ended at the struggling department store chain. Despite all of the buzz behind his arrival, net sales plunged $4.2 billion in its latest fiscal year. Things won't get any prettier when the retailer reports on Thursday, as the chain expects another sharp loss on sliding sales.

Investors will more than likely act on any insights by the new regime on how the retailer plans to turn its fortunes around. If not, this won't be the first once great retail chain to buckle. Shoppers can be fickle that way.

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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Related Tickers

9/26/2016 4:02 PM
IOC $49.52 Up +0.15 +0.30%
InterOil CAPS Rating: *
JCP $9.57 Down -0.21 -2.15%
J.C. Penney CAPS Rating: *
NAT $10.68 Down -0.17 -1.57%
Nordic American Ta… CAPS Rating: ***
RENN $1.92 Down -0.03 -1.54%
Renren CAPS Rating: *
VELTF $0.00 Up +0.00 +2.70%
Velti plc CAPS Rating: ****