5 Reasons to Worry About Next Week

The economy is showing signs of fumbling the recovery.

Sure, stocks closed at a multiyear high yesterday, but why is QE3 even happening if the Fed doesn't feel as if things can go downhill in a hurry without more stimulus?

Then there's the grim news out of the U.S. Census Bureau showing 46.2 million Americans living below the poverty line as of last year. The poverty rate has grown from 12.5% of the country just before the recession hit in 2007 to 15% today. Median U.S. income levels are also at problematic levels.

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

My Watchlist

LDK Solar (NYS: LDK)




FedEx (NYS: FDX)




General Mills (NYS: GIS)




Herman Miller (NAS: MLHR)




KB Home (NYS: KBH)




Source: Thomson Reuters.

Clearing the table
Let's start at the top with LDK Solar.

By now it's getting tiring to keep drumming up solar energy companies in this weekly column. Everyone should know the drill by now. The economic slowdown in China and the more drastic crisis in Europe have slowed the push to greener energy. The long-term savings are clear, but the initial investments are too dear when countries are strapped for cash.

However, it's still a surprise when a company like LDK Solar that was already losing money a year ago is expected to lose more than twice as much this time around.

LDK Solar isn't a surprising name to find on this list, but FedEx certainly is a bit of a shocker. Isn't the economy taking baby steps in the right direction? Shouldn't that mean plenty of busy FedEx pilots and drivers transporting parcels and documents?

Well, business has apparently been deteriorating at FedEx. Three months ago analysts figured that it would earn $1.70 a share. Just last month the consensus average was a still reasonable $1.57 a share. Either of those marks would've represented decent year-over-year improvement. Well, now the market's looking for net income of $1.41 a share.

It obviously didn't help last week when FedEx warned that a steep dip in manufacturing activity would hurt the bottom line at the world's largest air-cargo shipper.

General Mills isn't expected to be much of a cereal thriller when it reports on Tuesday. Analysts see the company behind Cheerios, Betty Crocker, and Hamburger Helper earning $0.63 a share, just short of the $0.64 a share it posted a year earlier. This would seem to make it possible that General Mills actually posts year-over-year improvement if it narrowly beats Wall Street's profit targets, but recent history hasn't been kind: General Mills has come up short in two of the past three quarters.

Herman Miller is the company that invented the cubicle, but the company also makes plenty of stylish office furniture that isn't as easy to ridicule. It's probably not a good sign for corporate America that the pros see Herman Miller's top and bottom lines declining slightly.

Finally, we have KB Home reporting on Friday. This one is a bit of a surprise. Most of the real estate developers that have been posting quarterly results lately are showing growth in profitability or turning losses into profits. KB Home is expected to actually post a wider deficit when it reports.

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 translate 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.

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The article 5 Reasons to Worry About Next Week originally appeared on Fool.com.

Motley Fool newsletter serviceshave recommended buying shares of FedEx. 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.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.

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