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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. As a special holiday treat, is publishing two extra supplemental previews for December.

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 Oracle (ORCL), Bed Bath & Beyond (BBBY), FedEx (FDX), Research in Motion (RIMM), Nike (NKE), CarMax (KMX), Walgreen (WAG), and Darden Restaurants (DRI).

Here is just a tiny sample of what wrote about Nike: Nike has topped analyst EPS estimates six of the past eight quarters, missing estimates twice. During that period, the stock has risen the next session three of eight quarters. Seasonally, the stock has risen three times in the past four years.


Last quarter, the company reported a -12% drop in profit for the three-month period that ended August 31st, though it did edge the expectations of Wall Street. The EPS beat was due to stronger-than-expected sales in North American, a slightly better-than-expected gross margin due to improved pricing and some easing on the cost front, along with aggressive share repurchases that retired 8.2 million shares during the quarter.

Nike's Q1 revenues were up 10% as reported, or up 15% excluding the impact of currencies, with constant-currency growth across nearly all geographies, categories and brands, the company said. Growth was double-digit for both Nike branded products and Converse.

"That's incredible growth in any environment and even more remarkable given the volatile global economy," CEO Mike Parker told analysts.

The company's reported profit fell to $567 million, $1.23 per share, down from the $645 million, or $1.36 per share, it reported last year.

Excluding Cole Haan and Umbro, brands Nike planned to sell, EPS for Q1 would have been about $1.27, -9% below last year, the company said.

Sales grew to $6.7 billion. Wall Street analysts were looking for EPS of $1.37 on revenue of $6.42 billion. ...

Outside of earnings, the Nike Swoosh, like the Golden Arches of McDonald's (MCD), is arguably among the world's most famous brands, certainly in the top five in our estimation. Each faces similar challenges from a slowing global economy in the near term, but it would be silly to bet against either of them out over the long haul.

There is always another high-profile sports event around the corner that the company can use to sell its products. Basketball in particular has been a strong category for the company. Meanwhile, some of the technological advances that the company is intertwining with its products with Nike+, including the launch of Nike+ Basketball and Nike+ Training, are very intriguing and could be a nice growth driver. ...

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 Adobe (ADBE) 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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