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Which Stocks Look Ready to Pop and Drop with Earnings Next 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 Dollar General (DG), Joy Global (JOY), Adobe (ADBE), Ciena (CIEN), VeriFone (PAY), and Costco (COST).

Here is just a tiny sample of what wrote about Dollar General:

Dollar General has beaten analyst EPS estimates seven of the past eight quarters, missing the consensus once. Over that period, the stock has risen the next session five of eight quarters. Seasonally, the stock has risen once in the last three years. ...

Last quarter, Dollar General reported that it earned $214.1 million, or 64 cents per share, for its fiscal second quarter ended August 3rd, compared with $146 million, or 42 cents per share, a year earlier.

Sales rose by 10.4% to $3.95 billion. Sales on a same-store basis grew by 5.1%.

Consumables sales continued to increase at a higher rate than non-consumables in the 2012 quarter, paced by the candy, snacks and perishable foods categories, the company said.

Dollar General revised its guidance. It said it expected to earn $2.77 to $2.85 per share this fiscal year, up from a June forecast of $2.68 to $2.78. The new outlook includes 4 cents per share from the favorable resolution of an income tax audit, the company said. ...

Outside of earnings, we like Dollar General's strategy of modestly increasing its store footprint to accommodate more cooler space for refrigerated foods, drinks, and snacks. It is the kind of merchandise that drives sales gains. The store can get bigger without being "super-sized" into a Wal-Mart (WMT) or Target (TGT) equivalent. ...

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 DSW (DSW) 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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