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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), Buffalo Wild Wings (BWLD), Blue Nile (NILE), Cisco (CSCO), Zillow (Nasdaq:Z), Whole Foods (WFM), NVIDIA (NVDA), NetApp (NTAP), and Deere (DE).

Here is just a tiny sample of what wrote about Michael Kors:

Michael Kors has topped analyst EPS estimates each quarter since it IPO'd in December 2011. Over that period, the stock has risen the next session all four quarters. ...

Last quarter, the fashion retailer reported a higher-than-expected second-quarter profit, helped by rising sales at its own stores and its new boutiques at department stores. Its guidance for the holiday quarter, however, was a bit light.

Net income more than tripled to $97.8 million, or 49 cents per share, for the quarter that ended September 29th, from $31.6 million, or 22 cents per share, a year earlier. Wall Street was looking for 40 cents per share.

Revenue soared in by 74% to $532.9 million. The company said all of its luxury categories performed well. Accessories, footwear, watches, jewelry, eyewear and related products were 79% of its product mix. Sales in Europe jumped by 97%, but that is off of a small base of stores.

Gross margin expanded 200 basis points to 59% for the quarter, driven primarily by lower markdowns. Kors' income from operations grew 126% to $158 million for the second quarter, compared to the same period last year. (The year-earlier results were adjusted for stock compensation expense associated with a private placement.)

On a segment basis, retail net sales grew 82% to $242 million, while sales on a same-store basis jumped by 45.2%. Retail sales growth was also driven by 66 store openings since the second quarter of last year, including 16 openings during the second quarter. Kors ended the quarter with 269 company-owned global retail stores, including concessions. ...

Outside of earnings, Kors has shown tremendous growth since going public last December. It has produced some eye-popping same-store sales comps while also rapidly growing its store base. It is also taking share in a number of luxury segments, including handbags where it has hurt rival Coach (COH).

One of our initial concerns with the company was that too much of its merchandise was finding its way into the off-price channels, which could dilute its appeal as a luxury brand. So far, though, that hasn't been an issue, and the company's goal is to eventually have 75% of its business coming from retail stores.

It's hard to argue with Kors' growth, and it still has a long runway to expand its store base, both at home and especially abroad. ...

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 Q4 so far were:

  • to be bullish on Netflix (NFLX) ahead of earnings.
  • to be bullish on Shutterfly (QCOM) ahead of earnings.
  • to be bearish on Akamai (AKAM) ahead of earnings.
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