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Which Stocks Look Ready to Pop and Drop with Earnings Next Week?

the Staff

Stocks tend to be most volatile around earnings season, when a good or bad report can make or break it. However, a good or even great earnings report doesn't necessarily translate into a huge pop for a stock.

During earnings season, publishes a comprehensive 25- to 40-page Earnings Preview report for the week ahead each Friday.

Over the past year, used the data it has collected to correctly predict investor reactions for approximately two-third of the stocks it's previewed.

In its latest earnings preview, looks at several popular stocks, including Michael Kors (KORS), Home Depot (HD), Cisco (CSCO), NetApp (NTAP), Abercrombie & Fitch (ANF), Wal-Mart (WMT), Target (TGT), Gap (GPS), Dollar Tree (DLTR), and Dell (DELL).

Here is just a tiny sample of what wrote about Home Depot:

Home Depot has beaten analyst EPS estimates six of eight quarters over the past two years, meeting the consensus twice. During that span, the stock has risen the next session five of eight quarters. Seasonally, the stock has risen twice in the past four years.

Last quarter, the company reported second-quarter net earnings of $1.5 billion, or $1.01 per share, compared with net earnings of $1.4 billion, or 86 cents per share, in the same period of fiscal 2011. EPS grew by more than 17%, aided by share repurchases in the past year.

Revenue grew by 1.7% to $20.6 billion. Sales on a same-store basis were up by 2.1% on a consolidated basis, while same-store results at the core U.S. stores grew by 2.6%.

Wall Street was looking for the company to report 97 cents per share in profit on sales of $20.74 billion.

The second quarter is normally one of the strongest selling seasons for the home improvement sector, but management said the warm winter pulled some sales that normally would have occurred in the spring and summer months forward, especially in the Northeast.

Home Depot said that it expects fiscal 2012 sales will be up approximately 4.6% from the prior year on a 53-week basis. Based on its year-to-date performance, management raised its fiscal 2012 guidance to $2.95 per share for the full year, up 19% from last year. The guidance includes the benefit of the year-to-date share repurchases and Home Depot's plans to repurchase $1.4 billion in additional shares over the remainder of the year. It had previously guided for EPS of $2.90. ...

Outside of earnings, Home Depot has consistently outperformed rival Lowe's (LOW) over the past couple of years under the leadership of CEO Fred Blake. Its execution, coupled with signs of some improvement in the housing market, bode well for continued solid growth. The devastation and eventual rebuilding associated with Hurricane Sandy should also provide a tailwind in 2013.

The company is also looking to drive growth in international markets, particularly Canada, Mexico, and China, which it entered through its 2006 acquisition of 12 Home Way stores. ...

The full earnings analysis includes a look at historical earnings data and EPS trends for the companies above and more; examines past investor reactions to earnings in various contexts; gives options activity analysis; reviews previous-quarter earnings; and gives an opinion on both what earnings will look like and how investors will react based on the aforementioned data points.

Just a few of the correct calls made for Q3 so far were:

  • to be bullish on Qualcomm (QCOM) ahead of earnings.
  • to be bullish on Sodastream (SODA) ahead of earnings.
  • to be bearish on J.C. Penney (JCP) ahead of earnings.
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