Which Stocks Look Ready to Pop and Drop with Earnings This Week?

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 20- to 30-page Earnings Preview report for the week ahead each Friday.

Over the past two years, BullMarket.com used the data it has collected to correctly predict investor reactions for nearly two-third of the stocks it's previewed.

In its latest earnings preview, BullMarket.com looks at several popular stocks, including LinkedIn (LNKD - News), OpenTable (OPEN - News), Whole Foods (WFM - News), Visa (V - News), MasterCard (MA - News), Acme Packet (APKT - News), Enterprise Products Partners (EPD - News), CVS Caremark (CVS - News), Skullcandy (SKUL - News), and Green Mountain (GMCR - News).

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

Visa is a global payments technology company that connects consumers, businesses, banks and governments in more than 200 countries and territories, enabling them to use digital currency instead of cash and checks It offers a range of branded payments product platforms, which its clients use to develop and offer credit, debit, prepaid and cash access programs for their customers ...

Last quarter, Visa reported a 16% increase in net income to $1.03 billion, or $1.49 per share, for the three months ended December 31st. It reported $884 million, or $1.23 per share, in the year-earlier period. The company's share repurchases reduced the outstanding share count by about -4% in 2011.

Revenue grew by 14% to $2.55 billion, up from $2.24 billion the prior year.

The results topped the Wall Street consensus estimates that called for EPS of $1.45 on $2.47 billion in revenue.

Payments volume grew by 13% during the three months that ended September 30th to $971 billion on a constant dollar basis. Revenue from this business line is recognized on a quarterly lagging basis. Payments volume on a constant dollar basis for the December quarter was up 11% to $994 billion. Cross-border volume grew by 13% in Q4 excluding currency impacts.

Total processed transactions, which represent transactions processed by the company's VisaNet payment network, totaled 13.6 billion, up 8% from the prior year.

Services revenues totaled $1.2 billion, up 14% from the year-earlier period. Services revenues are recognized based on payments volume in the prior quarter. All other revenue categories are recognized based on activity from the current quarter. Data processing revenues rose 13% year over year to $951 million, while international transaction revenues, which are driven by cross- border activity, grew 19% to $748 million. The Visa Europe licensing fee was $178 million, an 11% increase over the prior year.

Visa's incentive payments to encourage merchants and clients to use its network totaled $481 million, or 16% of its gross revenues, which was under the company's guidance. If the trend continues it could lead to continued outperformance on the bottom line.

Worldwide, Visa's credit and debit payment volumes grew 12% and 9%, respectively, on a constant dollar basis this past quarter. Volumes in the U.S. on all Visa products grew 7% during the quarter. Credit was the strongest performer with volume growing by 10%. Debit volume increased by just 4%. Debit volume growth has been slowing and the impact of the Durbin rules were clearly evident in Q1. ...

Visa has beaten analyst EPS estimates seven of the past eight quarters, meeting the consensus once. During that time frame, the stock has risen the next session three of eight quarter. Seasonally, the stock has risen three of the past four years. ...

Outside of earnings, fiscal 2012 will still be a bit of a transition year for Visa as it sees some pushback from the change in swipe fee rules. However, it should return to its solid growth path in FY13 off of a new base, driven by the global secular shift of consumers moving away from cash payments in favor of electronic payments. In the near to intermediate term, the company should benefit from increased consumer spending, more willingness for consumers to take on debt, and higher prices at the pump.

It's also worth reminding investors that Visa, unlike rival MasterCard, isn't exposed to the world's weakest region, Europe, as Visa Europe is a separate entity owned and governed by its European member financial institutions. It pays Visa an irrevocable and perpetual license of approximately $143 million per year, payable quarterly. ...

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.

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