The next stocks to get hit by the China earnings threat

As third-quarter earnings season kicks off this week, one company's report is already showing signs of stress from a decelerating Chinese economy.

Shares of Yum Brands plunged 19 percent Wednesday after reporting earnings that fell short of expectations, with China results particularly disappointing. Skin care company Nu Skin also saw its stock plummet on lower-than-expected sales in the Asian country.

And according to some traders, China could cause a lot more trouble as third-quarter earnings season heats up.

Erin Gibbs, equity chief investment officer of S&P Capital IQ, said she is concerned about companies with more than 10 percent of sales coming out of China. These include consumer discretionary stocks Delphi, BorgWarner and Leggett & Platt.

"BorgWarner had 11 percent of its sales last year come from China, and was expected to have a much higher percentage after their $550 million expansion program," Gibbs said. "They too could make missteps, or see lower-than-expected growth like Yum."

China accounts for 16 percent of sales for auto parts manufacturer Delphi, and 10 percent for bedding company Leggett & Platt.

Read MoreWho's next after Yum, Nu Skin China shockers?

Meanwhile, technician Todd Gordon of TradingAnalysis.com said semiconductor stocks could be the next group to fall.

According to Gordon, semiconductor companies have "amazing overseas exposure" to China's market, and the semiconductor ETF (SMH) tends to move in step with the China large-cap ETF (FXI).

Want to be a part of the Trading Nation? If you'd like to call into our live Wednesday show, email your name, number and a question to TradingNation@cnbc.com.

Videos

Trades to Watch

Trader Bios

About

Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

Read more

Connect