5 Reasons to Worry About Next Week

The economy is showing signs of fumbling the recovery.

The week may have begun with encouraging news on the employment front, but the Commerce Department is out with offsetting news on the housing front.

Sales of new homes plunged 7.3% last month. Yes, 2012 wound up being the best year homebuilders have had since 2009. It was the first annual increase in seven years! However, December's showing indicates that demand for new residential construction is cooling.

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.

Source: Thomson Reuters.

Clearing the table
Let's start at the top with Plum Creek. Owning 6.4 million acres of timberlands in major timber-producing regions would seem to be a sweet place to be planted these days. December's dip notwithstanding, isn't the first year of increasing new home sales since 2005 something that would benefit lumberjacks?

Unfortunately, it's just not playing out that way. Analysts see a sharp drop in profitability on a nearly 5% decline in revenue. Investors may be hoping for a beat, but the recent trend isn't kind. Plum Creek's bottom-line results have clocked in below Wall Street forecasts in three of the past four quarters.

Tim-berrr!

Gentex makes auto-dimming rearview mirrors, camera-based driver-assist systems, and other neat tech toys for cars these days. A whopping 98% of Gentex's sales come from these automatic-dimming mirrors, so one would think that the company would be in cruise control as auto sales spike.

Well, let's hit the brakes on that thesis. Analysts see Gentex posting slightly lower earnings on Tuesday with flat sales growth.

It wasn't always this way. Gentex had posted 12 consecutive quarters of year-over-year advances on the bottom line before shifting into reverse three months ago. The negative streak appears headed to be stretched to two quarters come next week.

Seagate is a leading maker of hard drives. It's easy to see why Seagate is slipping. PC sales are sluggish, and the "good enough" computing gadgets that are selling well -- tablets, smartphones, utlrabooks -- prefer solid-state flash memory instead of traditional hard drives. However, Seagate has been able to buck the trend before. The problem here is that Seagate has come up short in each of its two previous quarterly outings. The trend does not bode well for Seagate as it spins into place for Monday's report.

JDS Uniphase is also expected to be going the wrong way next week. The optical networking bellwether is projected to post flattish results on Wednesday. Analysts see revenue climbing nearly 3%, but profitability slipping by $0.01 a share.

Of all five companies in this list, JDS Uniphase is the best positioned to actually surprise the market with year-over-year improvement. Wall Street's only looking for a slight decline in net income, and you also have the company beating analyst profit targets easily in its two most recent quarters.

Finally, we have Pitney Bowes marked "return to sender." The undisputed champ when it comes to metered mail isn't a surprise on this list. The volume of mail we send out is fading in this era of email, fax machines, and smartphones.

Income investors are still drawn to Pitney Bowes. They see the ridiculously rich 12.5% yield and its history of increasing payouts, jumping in as they ignore the deteriorating fundamentals.

Pitney Bowes did bring in a new CEO this month, and the company's been trying to expand into enterprise solutions to wean itself off the metered mail beast. However, analysts see profitability and revenue continue to creep lower for the foreseeable future. That's not a letter that shareholders may want to read between the fat dividend checks.

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.