If You Care About Earnings, You Won't Want to Miss These

TheStreet.com

NEW YORK (TheStreet) -- Investors have an vibrant earnings week starting Monday when over 400 companies report their latest quarterly results. You probably won't follow them all, and neither will I.

I selected the top most potentially market moving companies to concentrate on. My previous earnings preview focus was "Microsoft Is a Buy Before Earnings Release." Inside this preview, I will include specific companies that I may trade myself.

BMY Chart
BMY data by YCharts

Bristol-Myers Squibb

Bristol-Myers Squibb, a biopharmaceutical company, engages in the discovery, development, licensing, manufacturing, marketing, distribution and sale of biopharmaceutical products that help patients prevail over serious diseases worldwide.

52-Week Range: $30.64 to $41.79

Price To Book: 4.9

I wrote several bullish Bristol-Myers articles over the last year, and I remain optimistic. My latest article about this pharmaceutical targets the attractive dividend yield. "Three Dividend-Paying Value Stocks"

Bristol-Myers retraced slightly, but has yet to provide an entry in the upper $39s. We may receive an opportunity after reporting. Bristol-Myers Squibb is forecast to report weak first-quarter earnings before the market opens on Thursday.

The consensus estimate is currently 41 cents a share, falling 23 cents (35.9%) from 64 cents during the same period last year. The lowest analyst estimate for this report is 36 cents per share, and the highest is 45 cents per share.


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Currently 13 out of 21 analysts rate the company a hold, while seven recommend buying and one recommends selling. Analysts may have missed a good one. In the last 12 months, the shares have substantially appreciated. The one year return is 22 percent, and the average analyst target price for Bristol-Myers Squibb is below the current market price at $37.28. The highest target is $45 with a low target of only $26.

The technical analysis appears strong. A rising 60-day moving average is above a rising 200 day moving average. Bristol-Myers is in a typical bull trend. Trend followers watch for this pattern and will hold a position until a technical break results in a signal to leave.

Bristol-Myers distributes $1.40 a year in dividends for an appealing yield of 3.4%. The combination of a large yield with strong fundamentals is why I featured it in the previously mentioned article. I believe they will beat the earnings estimate, but regardless, Bristol-Myers has the makings for a strong long-term hold.

At the time of writing and from the current short interest report, the short interest is slight and not a source of distraction. The small amount of short interest is 2.1%.

BMY Revenue Quarterly Chart
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CLF Chart
CLF data by YCharts

Cliffs Natural Resources

Cliffs Natural Resources Inc., a mining and natural resources company, engages in the production of iron ore pellets, fines and lump ore, and metallurgical coal.

52-Week Range: $16.96 to $71.60

Book Value: $32.51

Not surprisingly, after looking at the price chart Cliffs Natural Resources is forecast to show lower first-quarter earnings after the market closes on Wednesday.

The consensus estimate is currently 32 cents a share, a drop of 53 cents (62.4%) from 85 cents during the comparable quarter last year. Analysts are estimating as small as losing 4 cents per share, up to the most optimistic estimate of 77 cents per share.

Analyst opinion is mixed. Most of the analysts surveyed don't believe a buy or a sell should be made at this point. As I write this, Cliffs Natural Resources has two buy recommendations out of 21 analysts covering the company, 16 holds, and three recommend selling.

Shareholders have not been rewarded for their patience, shares have fallen 75% in the last year. However, the average analyst target price indicate the analysts believe we may be near a bottom. The average 12-month price target is $29.19.

After reducing their dividend amount, investors received 15 cents in the latest disbursement. Previously, quarterly payments were as much as 62.5 cents after raising the amount in early 2012. The dividend yield is 3.4%, but unless you want to own Cliff for the long haul, you may want to avoid this one if you're only yield hunting. At the rate of cash burn Cliff is experiencing, the yield may not last long.


Shares crumbled 15% in the last month. While a bottom may be approaching, the risk versus reward forces my hand to look at other more attractive opportunities. The light at the end of the tunnel may be an oncoming train.

Short interest with this stock is exceptionally high. More than one in five shares is short. Shorts are the smart money, but when they pile on this hard it can backfire too. The proportion of the float short is 25.80%. When conditions improve, and they will, expect a strong aggressive move higher when short sellers "un-pile" off of Cliff.

CLF Revenue Quarterly Chart
CLF Revenue Quarterly data by YCharts
DAL Chart
DAL data by YCharts

Delta Air Lines

Delta is America's fastest-growing international carrier. Delta Air Lines offers customers service to more destinations than any global airline with Delta and Delta Connection carrier service.

52-Week Range: $8.42 to $17.25

Book Value: $-2.50

Investors are looking forward to improving first-quarter earnings before the market opens on Tuesday. The consensus opinion is currently 6 cents a share, a progression of 11 cents (183.3%) from a loss of 5 cents during the corresponding period last year. The lowest analyst estimate is 1 cent per share, and the highest is 10 cents per share.

Analysts are in love with this company. Delta is sporting 15 buy or strong buy from a total of 16 analysts covering the company, only one hold, and not a sell rating to be found. Shares have truly appreciated, gaining 49% in the last year, and the average analyst target price for Delta Air Lines is $18.82.

I'm not a big fan of airlines. I think "Wall Street's" Gordon Gecko described investing in airlines best, and nothing has changed since the 1980s other than the crap we have to put up with to catch a flight. I have over 500,000 miles, but most of them through flying Northwest, which was bought out by Delta.

Part of the reason I don't care for this space is because I don't understand how almost an entire industry can have such a complex pricing mechanism. I get the idea of maximizing seat revenue. But when you take it to the point of complexity that many airlines including Delta have, you may be maximizing complexity more than revenue.

Southwest Air has one of the most straightforward pricing systems, and it is a leader in profitability. The pricing systems don't make that significant of a difference, but the leadership and thought process that decide on the summer experience do.

From a technical analysis perspective, Delta appears strong. Delta is in a moderately strong bull trend. Keep an eye on the $15 price level and if Delta holds more than a few days below the 60 day moving average, it may indicate a rotation out of Delta and further share price erosion.

The last reported short interest is only 1.1% of the float. Clearly short sellers aren't interested, and don't think Delta is expected to fall in price.

DAL Revenue Quarterly Chart
DAL Revenue Quarterly data by YCharts
ZNGA Chart
ZNGA data by YCharts

Zynga

Zynga develops, markets, and operates online social games as live services on the Internet, social networking sites, and mobile platforms.

52-Week Range: $2.09 to $10.59

Price To Book: 1.4

Zynga is forecast to show lower first-quarter earnings after the market closes on Wednesday. The consensus estimate is calling for a loss of 4 cents a share, a drop of 10 cents from a profit of six cents during the equivalent quarter last year. The lowest analyst estimate is losing 4 cents per share, and the highest is for a loss of one cent per share.

Zynga is an fascinating stock to follow. I have warned investors in several articles about the perils of Zynga as a result of their relationship (dependency) with Facebook . Starting with "Buy Apple and Google, Wait On Facebook, Stay Away From Zynga" and "Oops, I Did It Again: Facebook and Zynga Hit New Lows" while Zynga was still trading above $6 a share.

Zynga has fallen so much that buying the stock now is like buying an option that never expires. For this reason, I think Zynga makes a viable candidate for a small speculative position if you can acquire shares under $3. I wouldn't pay more than $3, but if management can learn to walk without the aid of Facebook, or catch a break with online gambling, investors could experience significant return.

This earnings report, while important, isn't going to make or break Zynga. You have to understand that Zynga is more of a binary play. Either they strike gold, and it turns into a three or four banger, or they wither and die.

Short-sellers have placed their bets on the prospect of gambling for Zynga. They don't think it will happen and expect Zynga's shares to continue falling. Over 17 percent of Zynga shares are shorted. Short-sellers are the smart money, so it's wise to pay attention to what they think. So buy a few shares if you think Zynga may pull it off, but keep your average cost under $3 until something significantly positive happens.

ZNGA Revenue Quarterly Chart
ZNGA Revenue Quarterly data by YCharts
T Chart
T data by YCharts

AT&T and Sprint Nextel report next week. However, AT&T's report matters while Sprint's report is overshadowed by buyout prospects.

The numbers appear quite different for these two telecommunication companies.

The average estimate for Sprint is currently a loss of 32 cents a share, backsliding 3 cents from a loss of 29 cents during the matching period in the previous year. Analysts' estimates this quarter range from losing 50 cents to a loss of 16 cents per share.

Analysts expect AT&T to deliver strong first-quarter earnings after the market closes on Tuesday. The consensus is 64 cents a share, a gain of 4 cents (6.3%) from 60 cents during the corresponding quarter last year. Analysts' estimates this quarter range from 60 cents to a high of 67 cents per share. Along with beating last year's results, this quarter is expected to exceed last quarter's result of 44 cents per share.

AT&T shares have moved higher 22% over the last 52 weeks. Analysts are calling for a price target of $36.80. And why not when shareholders receive $1.80 a year in dividends for a yield of 4.7%? Ma Bell's fat yield makes it reason enough to own, especially considering the fundamentals should allow the dividends to continue rolling into investor's accounts.

Previously, I gave my take on Bristol-Meyer and included a link to a recent bullish report. AT&T is also included in that article. You can find it here "Three Dividend-Paying Value Stocks."

The last reported short interest is paltry and without reason to believe it's a serious influence at only 1.5% of the average trading float. AT&T is a terrific stock to buy on dips. It moves around enough that if you're determined, you can pick up shares at a discount.

T Revenue Quarterly Chart
T Revenue Quarterly data by YCharts

You may be wondering where Apple is. After all, it does report on Tuesday. I am particularly bullish on Apple, especially so under $400 a share.

Apple has fallen so far that this earnings report has diminished in relative importance unless you want to traded and not invest in it. Take a look at my latest outlook for Apple and why you should be investing in it while others run with fear. "Be Greedy for Apple While Others Tremble."

At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

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