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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 Michael Kors (KORS), Home Depot (HD), Cisco (CSCO), NetApp (NTAP), Abercrombie & Fitch (ANF), Wal-Mart (WMT), Target (TGT), Gap (GPS), Dollar Tree (DLTR), and Dell (DELL).

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

Target has beaten analyst EPS estimates each quarter over the past two years. Over that stretch, the stock has risen the next session six of eight quarters. Seasonally, the stock has risen once in the last four years.

Last quarter, the retailer reported net income of $704 million for its fiscal Q2 2012 ended July 28th, equal to $1.06 per share. That compares to $704 million, or $1.03 per share, in Q2 2011 when it had more shares. Adjusted EPS rose 4.6% to $1.12. Analysts pegged adjusted EPS at $1.03 versus the $1.01

they were expecting.

Target's total revenue grew by 3.3% to $16.78 billion, which was just above the analyst consensus estimate of $16.75 billion. Retail sales rose 3.5% to $16.45 billion.

Sales on a same-store basis grew by 3.1% during the quarter, with the average transaction up 2.4% and the number of transactions up 0.7%.

Looking ahead, Target guided for 2012 adjusted EPS to range from $4.65 to $4.85, up from a prior forecast of $4.60 to $4.80. GAAP EPS is expected to come in between $4.20 and $4.40. Analysts were looking for EPS of $4.31. For Q3, the retailer projected adjusted EPS of 83-93 cents and GAAP EPS of 69-79 cents. Analysts were looking for EPS of 76 cents. ...

Outside of earnings, Target has posted pretty consistent same-store sales this year, as its RedCard Reward program continues to resonate with customers who are turning to the store more and more for household necessities.

Meanwhile, the retailer has done very well with limited-time designer offerings the past year from the likes of Missoni and Jason Wu, helping bring back its fashionably chic reputation and helping apparel sales. An upcoming collaboration with Neiman Marcus that will feature designs from the likes of Jason Wu, Marc Jacobs, Oscar de la Renta, and Tory Burch, among others, should help set it apart this holiday season and give sales a nice lift. ...

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