Previewing Earnings for Apple, Cree, Amazon.com, Baidu & Others

Indie Research

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, BullMarket.com publishes a comprehensive 25- to 40-page Earnings Preview report for the week ahead each Friday.

Over the past year, BullMarket.com 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, BullMarket.com looks at several popular stocks still set to report results, including Apple (AAPL), Deckers Outdoor (DECK), Yum Brands (YUM), Cree (CREE), Qualcomm (QCOM), F5 Networks (FFIV), Akamai (AKAM), Starbucks (SBUX), Baidu (BIDU), and Amazon.com (AMZN).

Here is just a tiny sample of what BullMarket.com wrote about Cree:

Cree has beaten EPS estimates four of the last eight quarters, meeting them once and missing three times. Over that period, the stock has risen the next session five of eight quarters. Seasonally, the stock has fallen each of the last four years.

Last quarter, the company reported a Q2 profit of $20.4 million, or 18 cents per share, up 69% from $12.1 million, or 10 cents per share, a year ago. Adjusted EPS rose to 32 cents from 25 cents, coming in above analyst expectations of 30 cents.

Revenue jumped 14% to $346.3 million, coming in above the $331.2 million consensus. Sales for LED products, which includes LED components, LED chips, and materials, rose 4% to $201.0 million. Sales of lighting products, which consists of revenue from indoor and outdoor LED lighting products plus traditional lighting systems, climbed 28% to $122.7 million. Power and RF products revenue soared 59% to $22.6 million.

Looking at other metrics, adjusted gross margin rose to 39.2% from 35.3%, and was up from 37.5% last quarter. LED products gross margin was 41.9% while lighting products gross margin was 33.7%.

Adjusted operating margin increased to 13.7% from 10.3%, and was up from 11.9% last quarter. ...

Outside of earnings, Cree's recent gross margin performance has helped put a big hole in the bears' biggest argument that competition from cheap Asian competitors is going to erode Cree's margins, much in the same way that happened in the solar space. However, as we've long noted, this is a flawed argument because, unlike in the solar industry where inefficiency can be overcome, the same dynamics don't apply to the LED industry because LEDs save energy, while solar cells create energy -- thus, adding more LEDs doesn't solve the inefficiency problem like it does for solar. As a result, technology plays a much more important role in the LED space, and Cree continues to be both the technology and cost leader, as it consistently looks to drive down costs to increase LED adoption.

The company's new "A" bulb product launch is also notable on several fronts. One, as we've noted before, this currently isn't a big market for LED lighting, but it has huge potential as incandescent bulbs across the globe begin to be phased out. The price is also below that of competitors, such as Philips, and once they qualify for subsidies, the prices will be pushed even lower. ...

The full BullMarket.com 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 BullMarket.com made for Q1 so far were:

  • to be bullish on Netflix (NFLX) ahead of earnings.
  • to be bearish on IBM (IBM) ahead of earnings.
  • to be bullish on Coach (COH) ahead of earnings.
  • A daily investment service that is committed to creating long-term wealth for its members, BullMarket.com's Recommended List of stocks is up 104.9% from 2009-2012 versus a 57.9% return for the S&P, a 47.0% outperformance, topping the benchmark each year since the start of the Great Recession. Subscribers receive actionable market commentary, access to 40+ stock ideas on the Recommended List, and real-time trade alerts. Plus, sign up for a free trial today to view Bull Market's in-depth Special Reports - including its annual High Yield and MLP reports - and its timely Earnings Previews, which are published every Friday during the heart of earnings season. Get a Risk-Free Trial to Bull Market Today! (Please note returns are unaudited.)

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