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5 Reasons to Worry About Next Week

By Rick Munarriz – Dec 7, 2012 at 1:01PM

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There are plenty of potholes waiting for investors to hit next week. Steer clear.

The economy is showing signs of fumbling the recovery.

The unemployment results look solid this morning, but is there more to this than meets the eye? It's hard to high-five on the lowest unemployment rate in four years when so many people have just flat-out dropped out of the workforce pool.

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

My Watchlist

Greif (GEF 3.45%)




Teavana (NYSE: TEA)




The Pantry (NASDAQ: PTRY)




Adobe (ADBE 3.41%)




Ciena (CIEN 3.73%)




Source: Thomson Reuters.

Clearing the table
Let's start at the top with Greif.

The provider of industrial packaging and storage products would seem to be a great proxy for the state of the economy. If business is booming, it means that manufacturers are busy making products and moving them around.

Well, analysts see a dip in both revenue and profitability at Greif when it reports on Monday.

Teavana's report may not seem to matter now. Starbucks (SBUX 3.38%) announced that it would acquire the high-end tea retailer last month. The java heavy wants to do for premium tea what it has done for premium coffee, and Teavana was a logical starting point as the leading mall chain that sells fancy tea leaves and tea-brewing equipment.

However, Monday's report out of Teavana may also shed some light on why the company made itself available. Yes, Starbucks is paying a healthy premium to where the stock was trading at the time, but the buyout price of $15.50 is actually below last year's IPO at $17.

According to analysts, Teavana is about to post its first quarterly loss as a public company. If so, it's easy to see why Teavana was quick to take Starbucks' money.

The Pantry operates a chain of 1,573 convenience stores. Kangaroo Express is its primary store moniker, though it has a presence in 13 different states with various other names.

Running a convenience store would seem to be a quintessential all-weather business, but that's just not happening this time. Analysts see The Pantry checking in with a profit of $0.08 a share on Tuesday morning, well short of the $0.37 a share it posted a year earlier.

Adobe is the leader in desktop publishing software. It's hard to escape the online experience without running into an Adobe-authored PDF file, a Flash video clip, or a graphic that's been enhanced using Adobe's iconic Photoshop photo editing program.

Unfortunately, we're eyeing a lean report when Adobe reports on Thursday. Wall Street sees revenue taking a 4% dip with profitability taking an even harder hit.

Finally, we have Ciena. The provider of optical networking solutions has seen better days. It posted a small profit a year ago, but the market's braced for a modest loss this time around. Sadly, investors should be used to this by now: It will be the third quarterly deficit in the company's past four quarters.

Making matters worse, Ciena has missed analyst targets in three of the past four quarters. In other words, as bad as a loss of $0.06 a share may sound, the recent trend suggests that there may be slightly more red ink than that.

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 Starbucks and Teavana Holdings and has the following options: short JAN 2013 $47.00 puts on Starbucks. Motley Fool newsletter services recommend Adobe Systems and Starbucks. 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

Ciena Corporation Stock Quote
Ciena Corporation
$42.81 (3.73%) $1.54
Adobe Inc. Stock Quote
Adobe Inc.
$294.97 (3.41%) $9.73
Greif, Inc. Stock Quote
Greif, Inc.
$62.95 (3.45%) $2.10
Starbucks Corporation Stock Quote
Starbucks Corporation
$88.51 (3.38%) $2.89

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