Netflix, McDonald's Earnings Preview

TheStreet.com

NEW YORK (TheStreet) -- Second quarter earnings season remains in high gear. Four key companies reported after the close on Wednesday and I tracked the up and down volatility in after hours trading. There are many key earnings releases next week, and today I profile six companies that report on Monday.

On Wednesday the market focused on comments from Fed Chief Bernanke before the House Financial Services Committee and today his comments continue before the Senate Banking Committee. Bernanke re-iterated his theme that QE3 and QE4 plus a 0% funds rate is still required to stimulate the economy.

In my opinion Federal Reserve policy has not worked and will not work. The latest Beige Book released Wednesday afternoon reported that the U.S. economy continues to grow at a modest to moderate pace.

I found a couple of questionable comments in the Beige Book. If residential construction shows strong demand, why did housing starts decline by 9.9% in June? If the economy has a solid base, why are many businesses reluctant to hire full time employees?

These four key companies reported after the close on Wednesday:

American Express ($76.80) set a multi-year high at $78.63 on July 15 and was trading lower going into its quarterly earnings report. The credit card company beat EPS estimates by 5 cents earning $1.22 per share, but missed revenue expectations and the stock continued lower in after hours trading to at least $75.75. The stock has a hold rating with a quarterly value level at $68.18 and monthly and semiannual pivots at $76.35 and $78.27.

eBay ($57.38) challenged its multi-year high at $58.04 set on April 11 before its earnings release. The company matched EPS estimates earning 54 cents per share and beat on the revenue line, but the performance of PayPal was below expectations and the stock traded down to $53.80 in after hours trading. This buy rated stock has a semiannual value level at $51.69 with a semiannual pivot at $56.21 and a monthly risky level at $58.11.

IBM ($194.55) traded as low as $188.41 on June 28, but with a buy rating this proved to be a buying opportunity. After the close on Wednesday IBM reported an EPS beat of 13 cents, earning $3.91 per share. The stock popped above $200 in after-hours trading despite missing on the revenue line. My weekly value level is $188.88 with a monthly risky level at $203.60.

Intel ($24.16) traded as low as $22.64 on July 10 versus my monthly value level at $22.95. After the close on Wednesday Intel reported it matched EPS estimates earning at 39 cents per share. The buy rated stock traded around the flat line in after-hours trading despite a miss on the revenue line and lowered guidance. Intel is down 3.5% in the premarket. My monthly value level is $22.95 with a weekly pivot at $24.40 and quarterly risky level at $25.38.

Reading the Table

OV/UN Valued: Stocks with a red number are undervalued by this percentage. Those with a black number are overvalued by that percentage according to ValuEngine.

VE Rating: A "1-engine" rating is a strong sell, a "2-engine" rating is a sell, a "3-engine" rating is a hold, a "4-engine" rating is a buy and a "5-engine" rating is a strong buy.

Last 12-Month Return (%): Stocks with a red number declined by that percentage over the last 12 months. Stocks with a black number increased by that percentage.

Forecast 1-Year Return: Stocks with a red number are projected to decline by that percentage over the next 12 months. Stocks with a black number in the table are projected to move higher by that percentage over the next 12 months.

Value Level: Price at which to enter a GTC limit order to buy on weakness. The letters mean; W-weekly, M-monthly, Q-quarterly, S-semiannual and A-annual.

Pivot: A level between a value level and risky level that should be a magnet during the time frame noted.

Risky Level: Price at which to enter a GTC limit order to sell on strength.

Companies reporting Monday:

The six stocks in today's table are overvalued by 7.8% to 47.4%. Three have hold ratings and three have buy ratings. The gains over the last 12 months are between 8.9% and 227.6%. Five of six are projected to gain between 2.3% and 8.6% over the next 12 months. All six are above their 200-day simple moving averages reflecting the risk of a reversion to the mean.

Halliburton ($44.14) set a multi-year high at $45.75 on May 21 then tested $40.12 on June 24. My weekly value level is $40.85 with an annual risky level at $45.72.

Hasbro ($46.03) set its multi-year high at $48.97 on May 22 then tested $43.46 on June 6. My semiannual value level is $45.27 with a monthly risky level at $47.83.

Kimberly Clark ($99.64) set its multi-year high at $106.54 on April 19 and traded as low as $93.76 on June 24. My weekly value level is $92.40 with a semiannual pivot at $100.90 and quarterly risky level at $103.37.

McDonald's ($100.10) set its multi-year high at $103.70 on April 12 then traded as low as $95.16 on June 6. My semiannual value level is $98.47 with an annual pivot at $99.38 and annual risky level at $104.63.

Netflix ($267.92) set a 52-week high at $268.26 on Wednesday. My semiannual value level is $237.48 with a monthly risky level at $272.18.

Texas Instruments ($37.90) set a multi-year high at $38.16 on Wednesday. My monthly value level is $35.31 with a semiannual risky level at $39.38.

At the time of publication the author held no positions in any of the stocks mentioned.

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

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