Earnings From These Seven Stocks Should Set the Market's Tone

TheStreet.com

NEW YORK (TheStreet) -- This week brings earnings reports from seven important stocks.

The market's reaction to these earnings reports should set the stage for market performance for at least the remainder of the fourth-quarter earnings season.

(Note that many major banks also are reporting earnings. You can read my profiles of them in "Buy-Rated Big-Bank Stocks to Trade Pre-Earnings.")

At www.ValuEngine.com we continue to show that all 16 market sectors are overvalued. The stocks I'm previewing today are in the following sectors: construction, which is overvalued by 20.1%; finance, overvalued by 13.0%; medical, overvalued by 12.2%; computer & technology, overvalued by 12.4%; oils-energy, overvalued by 3.3%; and multisector conglomerates, overvalued by 4.3%.

Two of the seven stocks profiled today are overvalued, one by 20.5% and another by a whopping 53.1%. Five have buy ratings, and two have hold ratings.

One is down 11.8% over the past 12 months, while four had double-digit gains ranging from 15.8% to 85.1% during that period. The upside for these stocks over the next 12 months ranges from 4.3% to 11.3%.

One of the seven has an elevated 12-month trailing price-to-earnings ratio of 36.8. Five of seven are trading above their 200-day simple moving averages (SMA), which reflects the downside risk of a reversion to the mean.

Here are my "buy and trade" profiles for this week's earnings stocks:

Reporting before the open on Tuesday is Lennar LEN ($40.95). It's expected to earn 43 cents per share. Lennar set a multiyear high at $42.00 on Jan. 9, which raises the bar given the 53.1% overvalued reading and 36.8 P/E ratio. The daily chart shows an overbought condition and the weekly chart is positive with the five-week modified moving average (MMA) at $38.58. My semiannual value level lags at $36.03 with a monthly pivot at $40.58 and a weekly risky level at $41.41.

Reporting before the open on Wednesday is Goldman Sachs GS ($137.13). It's expected to earn $3.37 per share, raised from $3.21 a week ago. Goldman set a new 52-week high at $138.15 on Jan 10. The daily chart is extremely overbought, and the stock is 20.5% overvalued. The weekly chart is positive with the five-week MMA at $126.47 and the stock just above its 200-week SMA at $136.83. My monthly value level lags at $108.66 with a weekly pivot at $136.77 and a semiannual risky level at $180.10, which is where the stock traded back on April 17, 2012.

Reporting before the open on Thursday is UnitedHealth Group UNH ($52.82). It's expected to earn $1.20 per share. UNH set a multiyear high at $60.75 back on June 19, 2012. The daily chart is neutral, and the weekly chart is negative with the stock below its five-week MMA at $53.65. My annual value level lags at $44.08 with a monthly pivot at $53.61 and a semiannual risky level at $54.10.

Reporting most likely before the open on Thursday is Morgan Stanley MS ($20.17). It's expected to earn 29 cents a share, a downward revision from 31 cents a week ago. Even with a hold rating and lowered earnings estimate, the stock is just below its March 26, 2012 high at $21.19. The daily and weekly charts are both positive, with the stock above the five-week MMA at $18.56. My monthly value level is $15.13 with a weekly pivot at $20.80 and semiannual risky level at $28.29.

Reporting after the close on Thursday is Intel INTC ($22.00) - is expected to earn $0.45 per share. Intel is well below its multi-year high at $29.27 set on May 3, 2012. The daily chart just became overbought and the weekly chart is positive with the stock above the five-week MMA at $21.03 and the 200-week SMA at $21.60. My semiannual value level is $19.80 with a weekly pivot at $21.17 and quarterly risky level at $24.88.

Reporting before the open on Friday is General Electric GE ($21.13). It's expected to earn 43 cents per share. GE is well below its multiyear high at $23.19 from Oct. 5, 2012. The daily chart is neutral, and the weekly chart is positive with the stock on the cusp of the five-week MMA at $21.11. My semiannual value level is $19.17 with a quarterly pivot at $21.19 and monthly risky level at $22.26.

Reporting before the open on Friday is Schlumberger SLB ($73.75). It's expected to earn $1.09 per share, up a penny from a week ago. SLB is well below its 52-week high at $80.78 Feb. 22, 2012. The daily chart is overbought, and the weekly chart is positive with the stock above the five-week MMA at $71.03 and the 200-week SMA at $69.06. My monthly value level lags at $64.50 with a weekly pivot at $72.39 and semiannual risky level at $94.62.

At the time of publication, Suttmeier had no positions in stocks mentioned.

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

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