4 Reasons to Worry About Next Week

The economy is showing signs of fumbling the recovery.

If you think that unemployment is a problem here, trek on over to Spain, where the unemployment rate is three times higher. Is it any wonder that Moody's downgraded Spain's credit rating on Wednesday?

It's not just iffy news at the macro 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.


Latest-Quarter EPS (estimated)

Year-Ago Quarter EPS


Discover Financial Services (NYS: DFS)




Jefferies (NYS: JEF)




Jinko Solar (NYS: JKS)




Le Gaga (NAS: GAGA)




Source: Thomson Reuters.

Clearing the table
Let's start at the top with Discover Financial Services.

Credit cards would seem to be a growing industry as consumers begin spending a little more, and traditional lending outlets get stingier. Discover's larger rivals managed to post bottom-line growth in their latest quarterly reports. Why not the folks behind the Discover plastic?

Well, that's how it used to be for Discover Financial Services. Profits rose in each of the six previous quarters. Investors just don't see that happening now -- and for the next quarter, for that matter.

Jefferies is one of the few investment bankers doing the right thing with executive pay and bonuses. After seeing its stock fall sharply over the past year, its CEO agreed to take a pay cut and several executives decided to return their bonuses. These are the acts of accountability that investors should applaud, but we're still left with a global financier that's failing to move its bottom line in the right direction.

Jefferies may have attracted the attention of mutual fund icon Bruce Berkowitz, but the story here is still a company expected to see its profitability decline by 17% when it reports on Tuesday.

Jinko Solar's story is a familiar one to anyone paying attention to how earnings reports have played out in the solar energy sector in recent months. Jinko was profitable a year ago. It's not profitable now.

This will be the third consecutive meaty quarterly deficit for Jinko. It isn't any wonder to learn that the stock has shed more than 80% of its value over the past year.

Le Gaga Holdings has nothing to do with Lady Gaga. It's actually a Chinese company. The greenhouse vegetable producer may seem cheap at this point. It fetches an earnings multiple in the single digits, even though analysts see revenue growing by 34% in both the fiscal year that ended in March as well as the new fiscal year.

Unfortunately Le Gaga isn't making the cut in this week's list of reasons to worry by accident. There's no poker face here, Lady Gaga fans. Wall Street's holding out for a profit of $0.19 a share when Le Gaga reports on Wednesday to close out the 2012 fiscal year, well short of the $0.27-a-share profit it scored during the same fiscal fourth quarter a year earlier.

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.

If four reasons to worry aren't enough, let's make your future No. 5. There's a single shocking truth about your retirement that you may not know. It's part of a free report that won't be around forever, so check it out now.

At the time thisarticle was published Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.

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