5 Reasons to Worry About Next Week: Zagg Inc (ZAGG), Ares Capital Corporation (ARCC)

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The economy is showing signs of fumbling the recovery.

Business activity indexes in Europe show that the region still has a long way to go, and things aren’t necessarily rosy closer to home.

Unless stocks rally on Friday, the seven-week streak of rising stock prices will come to a fitting end.

Zagg Inc (NASDAQ:ZAGG)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.

Company Latest-Quarter EPS (estimated) Year-Ago Quarter EPS
ZAGG Inc (NASDAQ:ZAGG) $0.29 $0.32


R.R. Donnelley & Sons Company


$0.37 $0.46
Molycorp Inc (NYSE:MCP) ($0.31) $0.41
Halcon Resources Corp (NYSE:HK) $0.02 $0.04
Ares Capital Corporation (NASDAQ:ARCC) $0.41 $0.48

Source: Thomson Reuters.

Clearing the table
Let’s start at the top with ZAGG. ZAGG is the company behind the popular invisibleSHIELD screen protectors for smartphones and tablets. It also puts out a growing line of third-party accessories for consumer electronics products.

ZAGG has been challenged lately, and the climate will get even harder if the new Gorilla Glass that many phones and tablets will be switching to later this year lives up to the scratch-resistant hype.

Analysts still see ZAGG growing its revenue at a double-digit clip in its latest quarter, but they also see a slight dip in profitability. Squeezed margins will do that. The pros don’t see ZAGG missing by much when it reports on Tuesday, but the company’s coming off a rare quarterly miss so there’s plenty to prove in the report.

R.R. Donnelley and Sons is a leading provider of integrated communications for corporations. R.R. Donnelley’s more than 60,000 clients rely on the company to serve up online and offline premedia, printing, logistics, and business process outsourcing products and services.

This hasn’t been a growth business lately, but the one thing keeping R.R. Donnelley’s stock steady is its juicy dividend. R.R. Donnelley is actually earning more than enough to cover its quarterly $0.26-a-share distributions going, a hefty payout that finds the shares yielding 10.7%.

However, as revenue and profitability continues to decline and R.R. Donnelley’s pesky long-term debt remains, the chunky dividend rate won’t be sustainable forever.

Molycorp is a leading producer of rare-earth oxides. The limited nature of the elements and their integration in popular consumer electronics made this a hot sector several quarters ago, but the market has turned on Molycorp. After posting a reasonable profit a year earlier, analysts are holding out for a loss this time around.

The future won’t get any easier. A year ago, Wall Street figured that Molycorp would be earning more than $7 a share this year. Now those same analysts are holding out for an annual deficit in 2013.

Halcon Resources is an oil and natural gas developer with interest in the Woodbine, Eagle Ford, and Bakken shale regions.

Fellow Fool Rich Duprey recently screened for growing companies with market caps south of $3 billion and was drawn to Halcon and the 32% annualized growth rate that analysts see for the next five years.

Unfortunately, that’s a long-term growth rate and not one that applies to the here and now. When Halcon Resources reports next Thursday, analysts see the company earning half as much as it did a year earlier.

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