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5 Reasons to Worry About Next Week

By Rick Munarriz - Oct 12, 2012 at 11:04AM

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There's trouble brewing at the other end of this weekend.

The economy is showing signs of fumbling the recovery.

Wall Street hasn't had a good week. The Dow and Nasdaq composites have fallen in each of the first four trading days. The S&P 500 was playing along, only to buck the trend with a meager 0.02% increase on Thursday.

However, even the S&P 500 had closed lower in each of the four trading sessions.

It's not just iffy news at the overall market level.

There are 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

My

Watchlist

Joe's Jeans (NASDAQ: JOEZ)

($0.01)

$0.01

Add

Intel (INTC 1.46%)

$0.50

$0.65

Add

Halliburton (HAL -0.07%)

$0.68

$0.94

Add

Nucor (NUE 0.70%)

$0.41

$0.57

Add

SanDisk (NASDAQ: SNDK)

$0.33

$1.20

Add

Source: Thomson Reuters.

Clearing the table
Let's start at the top with Joe's Jeans.

The maker of premium denim was in the spotlight earlier this week. Larger rival True Religion (NASDAQ: TRLG) saw its shares spike after announcing that it was exploring strategic alternatives after receiving third-party buyout interest.

A potential sale of True Religion would help elevate valuations for the companies behind pricey jeans, but is Joe's going to earn the right to be a part of that conversation? Analysts do see Joe's Jeans posting double-digit gains on the top line next week, but they also see a rare dip into the red.

Intel knows the deal. Folks aren't buying PCs. Its nearest microprocessor rival just announced last night that it suffered a 10% sequential dip in revenue for its latest quarter. It's becoming clear that the arrival later this month of Windows 8 won't be the hardware-upgrade catalyst that the industry has experienced during previous operating system rollouts.

Intel has done its part to diversify, including making inroads in the more lucrative smartphone and tablet markets. Will it matter? The market doesn't seem to think so. After a brief turnaround, this is shaping up to be the third quarter in a row in which Intel fails to deliver earnings growth.

Halliburton is a controversial name for some investors, but the oil-field services provider is unquestionably relevant. The problem at Halliburton these days is contracting margins. Wall Street sees Halliburton's profitability plunging 28%, even though they believe the company's revenue will check in 9% higher.

Nucor is a leading maker of steel products."We currently expect to see a modest reduction in earnings exclusive of one-time charges for the third quarter of 2012," the company warned three months ago, and it confirmed that last month by posting guidance that even after adjusted for one-time hits would still fall well short of the $0.57 a share it earned a year earlier.

Finally, we have SanDisk. The leading maker of flash memory would seem to be on top of the world. Digital cameras are gobbling up memory cards and several other devices are embracing the solid-state nature of flash.

Unfortunately for SanDisk, it's not alone. A glut of flash memory has driven down prices. That's great for consumers, but not so great for SanDisk.

Investors won't be shocked when SanDisk posts a steep decline in profitability when it reports on Thursday. This will merely be the third consecutive quarter that this has happened.

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.

Longtime Fool contributor Rick Aristotle Munarriz has no positions in the stocks mentioned above. The Motley Fool owns shares of Halliburton Company and Intel. Motley Fool newsletter services recommend Halliburton Company, Intel, Nucor, and True Religion Apparel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Intel Corporation Stock Quote
Intel Corporation
INTC
$36.11 (1.46%) $0.52
Halliburton Company Stock Quote
Halliburton Company
HAL
$29.55 (-0.07%) $0.02
Nucor Corporation Stock Quote
Nucor Corporation
NUE
$142.89 (0.70%) $0.99

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