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Which Stocks Look Ready to Pop and Drop with Earnings This 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 Wal-Mart:

Wal-Mart has topped analyst EPS estimates five of the past eight quarters, meeting estimates once and missing twice. During that period, the stock has risen the next session three of eight quarters. Seasonally, the stock has risen three of the past four years.

Last quarter, the world's largest retailer's 2Q profits came in ahead of Wall Street's expectations, but sales were a little light as was its full-year guidance. Wal-Mart said it expects third-quarter EPS of $1.04-$1.09. The consensus had been $1.05 per share.

For the full year, the company forecast a profit of $4.83-$4.93 per share. It previously guided for EPS of $4.72-$4.92. Analysts were expecting EPS of $4.93 and that full-year view hasn't moved.

Wal-Mart 's second-quarter profit rose nearly 6% to $4.02 billion, or $1.19 per share, from $3.80 billion, or $1.09 per share, a year earlier. Revenue rose 5% to $113.53 billion.

Analysts had expected a profit of $1.17 per share on revenue of $114.63 billion.

Wal-Mart's U.S. stores reported a 2.2% increase in same-store sales, reversing a -0.9% decline in the year-earlier period. Ticket and traffic were both positive. The U.S. stores have now delivered positive comp sales for four-consecutive quarters. The U.S. unit reported $5.25 billion in operating income, up 5.3%, on a 3.8% increase in net sales to $62.4 billion. ...

Outside of earnings, Wal-Mart's stock has been on a surprisingly good run since getting hit with bribery charges in Mexico. The retailer has been performing better operationally, helped by adding back SKUs and its compare and save ad campaign. Investors who follow the stock may remember that the company made an earlier misstep by removing products, which upset customers.

While Wal-Mart has seen same-store sales growth rebound, better expense controls, and improved margins, its sale growth is still lagging most of its peers. ...

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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