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Which Stocks Look Ready to Surge and Sink 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.

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 JP Morgan:

JP Morgan has topped analyst EPS estimates seven of the past eight quarters, meeting estimates once. Over that span, the stock has risen the next session three of eight quarters. Seasonally, the stock has risen once in the last four years. ...

Last quarter, The bank reported a profit of $5.71 billion, or $1.40 a share, compared to $4.26 billion, or $1.02 a share, a year earlier. The latest period included a net four-cent per-share gain from a number of one-time items. The year-earlier period included a net five-cent benefit from items. Revenue rose

6% from a year ago to $25.9 billion, reversing the declines posted in previous quarters.

The results topped $1.24 per share in profit on revenue of $24.53 billion that Wall Street was expecting.

The items recorded in Q3 included a benefit from reduced mortgage loan reserves, a hit from increased charge-offs, a gain from debt extinguishment, and higher litigation reserves. ...

Outside of earnings, we consider JP Morgan to be one of the world's best-run financial institutions under CEO Jamie Dimon's leadership. We believe the bank is well positioned to grab market share and increase shareholder value as it resumes share repurchases in 2013. Its other strengths include its strong position in mortgage banking, where it should benefit from an improved housing market; a top-tier mortgage banking and capital markets operation; a huge credit card business; a solid balance sheet; and strong leadership from Dimon.

Risks include the possibility that Dimon could leave the bank and a successor might not be as talented, though there is no indication he is itching to move on. It also still has legacy costs to work through related to mortgage loan defaults and increased regulatory oversight. Critics also point out that some of the recent bottom-line growth was due to large releases of no longer needed loan-loss reserves that will diminish in the future. The low interest rate environment also makes it tough to make money on traditional banking activities, but JPM gets over half of its income from non-interest sources. ...

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 Deckers Outdoor (DECK) ahead of earnings.
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