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Which Stocks Look Ready to Pop and Drop with Earnings?

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 Green Mountain Coffee (GMCR), Splunk (SPLK), Tiffany (TIF), Ulta Salon (ULTA), and Lululemon Athletica (LULU).

Here is just a tiny sample of what wrote about Tiffany:

Tiffany has beaten analyst EPS estimates six of eight quarters over the past two years, missing the consensus twice. During that span, the stock has risen the next session six of eight quarters. Seasonally, the stock has risen three times in the past four years. ...

Last quarter, Tiffany said its net income rose by 2% to $92 million, or 72 cents per share, compared with $90 million, or 69 cents per share, in the year-earlier period.

Results in the year-earlier period were reduced by -$21 million, or -16 cents per share, for costs associated with relocating the company's headquarters in New York City. Excluding those costs, net income fell by -17%.

Analysts had forecast a profit of 73 cents in the most-recent period.

Worldwide sales grew by 2% to $887 million as reported and by 3% on a currency neutral basis. ...

Outside of earnings, Tiffany is a premier luxury brand that generates some of the highest sales per square foot in the retail space. Japan, which represents about 20% of sales, has been a weak market for the company for quite awhile, and Europe is also a big market for the company. The company has seen strength in its other geographies, particularly in China, and overall global expansion opportunities remain strong.

Earlier this year, the company introduced a new product line called RUBEDO, which combines silver, gold and copper in a rose-gold-color line, paired in some cases with silver. The line was off to a solid start and carries better margins at lower price points. The expected loss of the collection from Italian jewelry designer Elsa Peretti, which represented about 10% of its sales, meanwhile, is a negative. ...

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 eBay (EBAY) ahead of earnings.
  • to be bullish on (CRM) ahead of earnings.
  • to be bearish on Hewlett-Packard (HPQ) ahead of earnings.
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