7 Reasons to Worry About Next Week

I'm starting to understand the hubbub over the whole "Sell in May and go away" adage. If you hate market volatility and you're light on Dramamine, this has been a crazy month.

Serious surges have followed serious dives.

As investors, we're trained to look beyond the daily gyrations. Our emphasis is on the fundamentals, and as we peek out heads out of this recession it's great to know that Corporate America is back on track.

What's that? Not all companies are on the growth bandwagon? Oh dear.

Even as the economy shows signs of life, there are still plenty of companies posting lower earnings than they did a year ago. Let's go over a few of the pretenders that are expected to go the wrong way on the bottom line next week.

Source: Yahoo Finance.

Clearing the table
There will be more companies posting lower earnings next week, but these are just a few of the names that really jump out at me.

Let's start with Lowe's. The home improvement superstore chain should be thriving during the early phases of an economic recovery. Home furnishings retailers have been coming through with healthy comps lately and even its larger hardware store rival is expected to post a slight improvement on the bottom line next week.

Giant Interactive is another anomaly. Online gaming continues to be huge in China, and Giant Interactive remains one of the biggest players in multiplayer web-tethered fantasy games. Analysts expect the company to post marginally improved bottom-line results for all of 2010, but all of the gains will likely come during the latter half of the year. Wall Street is targeting year-over-year dips for its latest quarter as well as the current one.

BJ's Wholesale Club is another tough one to figure out. Warehouse clubs are viewed as recession resistant. When money's tight, thrifty shoppers flock to BJ's to get more bang for their buck in bulk packaging and bare-boned store decor. It's a model that worked during the economic downturn. Heading into next Wednesday's report, BJ's had posted year-over-year profit growth in 10 of the past 11 quarters.

Deere is a giant in agricultural equipment. It was able to cut expenses faster than revenue declined three months ago, but the pros don't see that happening this time around. In fact, it's expected to be a complete role reversal since Wall Street is projecting a 7% gain on Deere's top line despite its bottom-line slip.

Hot Topic had a brief moment in the sun when the Twilight craze first took off. Shoppers ironically flocked to the edgy retailer, embracing alt-rock fashions and black shirts with hipster cultural icons, bands, and characters. Things haven't been as kind to Hot Topic in recent quarters. Income investors initially cheered last month's decision to introduce a quarterly dividend, but that didn't last long. It's hard to take a beefy yield seriously when profitability is going the wrong way.

Weakness at Polo Ralph Lauren proves that Hot Topic isn't simply a genre-specific knock. Collar-popping preppies donning Polo and Ralph Lauren duds and nonconformist Hot Topic shoppers are in the same boat. The economy is showing signs of life. Some retailers are showing signs of life. Unfortunately, not all clothes are rising with the floating clothesline.

Finally we have Red Robin Gourmet Burgers coming off as medium-rare. A KeyBanc Capital Markets analyst upgraded shares of the quick-service burger chain last month, encouraged by its perpetually changing menu deals and the industry's overall health. Well, there may be gold in the golden arches, but this robin isn't singing as loud as it used to on the bottom line.

Why the long face, short seller?
These seven companies have -- literally -- seen better days. The market has rewarded many of these stocks with healthy gains over the past year, but they still haven't earned those upticks.

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.