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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 Kinder Morgan Energy (KMP), JP Morgan Chase (JPM), eBay (EBAY), Goldman Sachs (GS), Citigroup (NYSE:C), Intel (INTC), and Bank of America (BAC).

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

Intel has topped the EPS consensus each quarter over the past two years. During that time, the stock has risen the next session four of eight quarters. Seasonally, the stock has risen two of the last four years. ...

Last quarter, Intel reported net income of $2.97 billion, or 58 cents a share, compared with $3.47 billion, or 65 cents a share, in the same quarter last year. Intel warned in early September that the third quarter was going to be weak, so its -14% drop in profits didn't surprise investors.

Excluding amortization charges for some assets it acquired and related tax impacts, the company's adjusted EPS of 60 cents was well ahead of the 50 cents that Wall Street was expecting.

Its revenue of $13.5 billion was down from $14.2 billion a year earlier but slightly ahead of its September forecast. Analysts were looking for $13.23 billion in revenue.

Intel estimated that its Q4 fourth-quarter revenue would be approximately $13.6 billion, plus or minus $500 million. The Wall Street consensus was for sales of $13.74 billion. ...

Outside of earnings, the Intel-Microsoft alliance widely referred to as "WinTel" was a winning combination during the PC era, but the iPad and smartphones changed the dynamic and has pressured Intel to respond, so far to mixed success. The initial license numbers that Microsoft (MSFT)announced for Windows 8 were good but not overwhelming; this time around the latest version of Windows isn't expected to produce the same surge in PC sales that previous versions enjoyed. Still, we don't see PCs and desktops going the way of the horse and buggy any time soon as developing markets offer new opportunities for sales.

Recent weakness in the server market is largely driven by macro fears about the global economy. Intel is still a dominant player in server chips and as large enterprises feel more confident, they will likely increase their hardware purchases as data volumes are growing exponentially.

The timing of CEO Paul Otellini's departure is curious but every indication is that it was solely his decision to step away sooner than expected and that he was not pushed out. The Board's announcement that it would consider an outsider for the top job raised some eyebrows given Intel has historically been a very insular company that is considered to have a deep management bench.

While chip prices could come down along with margins as Intel pushes harder into the mobile market, it will still generate tremendous cash flows and its dividend payout seems in little danger of being cut given there are plenty of other ways for Intel to conserve cash if it were really an issue. With over $10 billion in total cash on its books ($3.25 billion net), it isn't. ...

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 were:

  • to be bullish on Facebook (FB) ahead of earnings.
  • to be bullish on Qualcomm (QCOM) ahead of earnings.
  • to be bearish on J.C. Penney (JCP) ahead of earnings.
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