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

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, BullMarket.com publishes a comprehensive 25- to 40-page Earnings Preview report for the week ahead each Friday.

Over the past year, BullMarket.com 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, BullMarket.com looks at several popular stocks, including Monster Beverage (MNST), Herbalife (HLF), Deckers Outdoors (DECK), SodaStream (SODA), The Cheesecake Factory (CAKE), Toll Brothers (TOL), Wal-Mart (WMT), Nordstrom (JWN), Intuit (INTU), Hewlett-Packard (HPQ), and Abercrombie & Fitch (ANF).

Here is just a tiny sample of what BullMarket.com wrote about Deckers: Deckers has beaten analyst EPS estimates seven of eight quarters over the past two years, missing forecasts once. Over that stretch, the stock has risen the next session three of eight quarters. Seasonally, the stock has risen once in the last four years. ...

Last quarter, Deckers posted a profit of $42.5 million, or $1.18 per share, for the quarter ended September 30th, compared to $62.8 million, or $1.59 per share, a year earlier. Analysts were looking for EPS of $1.04.

Revenue fell -9% to $376.4 million, well below the $412.1 million analysts were expecting. Retail sales increased 13% to $39.1 million from $34.7 million, while same-store sales fell -13.1%.

Domestic sales fell -6% to $242.2 million, while e-commerce sales increased 29% to $13.3 million. International sales dropped -14% to $134.2 million, down from $156.4 million last year.

Gross margins fell -670 basis points to 42.3%.

By brand, UGG sales fell -12% to $332.8 million from $376.7 million.

Teva sales, meanwhile, jumped 22% to $17.9 million from $14.7 million a year ago. The Sanuk brand, which was acquired in July 2011, saw sales increase 18% to $18.3 million from $15.6 million. Sales for other brands dropped -1% to $7.3 million.

Inventories rose 36% from a year ago, with UGG inventories up 39%. ...

Outside of earnings, there continues to be a number of red flags with Deckers, chief among them too high inventory. In addition, earlier price cuts indicate the company has very limited pricing power, and while sheepskin costs are coming down, margins are being squeezed. Deckers has also gone from a very strong cash position with no debt to carrying more debt than cash on hand.

The company should, however, be able to use the cold weather this year and promotional activity to help reduce its inventory levels. Meanwhile, its new UGG Specialty Classics have been well received and could set the company up for a rebound in 2013. ...
The full BullMarket.com 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 BullMarket.com made for Q4 so far were:

  • to be bullish on Netflix (NFLX) ahead of earnings.
  • to be bullish on Michael Kors (KORS) ahead of earnings.
  • to be bearish on Akamai (AKAM) ahead of earnings.
  • A daily investment service that is committed to creating long-term wealth for its members, BullMarket.com's Recommended List of stocks is up 104.9% from 2009-2012 versus a 57.9% return for the S&P, a 47.0% outperformance, topping the benchmark each year since the start of the Great Recession. Subscribers receive actionable market commentary, access to 40+ stock ideas on the Recommended List, and real-time trade alerts. Plus, sign up for a free trial today to view Bull Market's in-depth Special Reports - including its annual High Yield and MLP reports - and its timely Earnings Previews, which are published every Friday during the heart of earnings season. Get a Risk-Free Trial to Bull Market Today! (Please note returns are unaudited.)