Which Stocks Look Ready to Pop and Drop with Earnings Next 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 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, including Whole Foods (WFM), STEC (STEC), CVS Caremark (CVS), Sodastream (SODA), J.C. Penney (JCP), Qualcomm (QCOM), NVIDIA (NVDA), Nordstrom (JWN), and Groupon (GRPN).

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

CVS has topped analyst EPS estimates seven of the past eight quarters, meeting estimates once. During that period, the stock has risen the next session five of eight quarters. Seasonally, the stock has risen three times in the past four years.

Last quarter, the company said that it earned $966 million in net income in Q2, equal to 75 cents per share. It earned $816 million, or 60 cents per share, in the year-ago period. Its net income adjusted for one-time items totaled 81 cents per share, a penny better than the analyst consensus estimate.

Net revenue grew by 16% to a record $30.7 billion, paced by a 28.2% jump for the PBM unit and a 6.9% increase in sales at its drugstores.

The consolidated gross margin was 17.7% in Q2, down -150 basis points year over year, driven by mix as the lower gross margin PBM business grew revenues faster in the quarter than the retail business.

CVS's drugstores increased sales by 6.9% to $15.8 billion. Same-store sales increased 5.6%, with pharmacy same-store sales up by 7.2% year over year.

Same-store prescription volumes rose 7.7% when 90-day scripts are counted as one script. When converting 90-day scripts into three scripts, same-store prescription volumes were up by 9.8%. ...

Outside of earnings, CVS has benefited the last ten months from the dispute between rival Walgreen (WAG) and pharmacy benefits manager Express Scripts (ESRX), which forced Express Scripts patients to CVS and other pharmacies. While the dispute has been resolved, pharmacy customers are some of the hardest to win back, thus much of the damage has been done, and CVS' prediction that it will retain half of the Walgreen customers it gained as a result of the dispute seems low.

In addition, if Walgreen had to succumb to Express Scripts' terms, then that likely will benefit CVS' PBM, Caremark, in any future negotiations with Walgreen and other drug stores. CVS management has always maintained that PBMs holding the line on drug stores was more important than the gains it would see from additional customers it gained from Walgreen because of the dispute. Meanwhile, CVS should also benefit from the current generic drug cycle, and management appears very focused on using its strong free cash flow to help create shareholder value.

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 Q3 were:

  • to be bullish on Priceline.com (PCLN) ahead of earnings.
  • to be bullish on Starbucks (SBUX) ahead of earnings.
  • to be bearish on First Solar (FSLR) 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 33.3% from 2008-2011 versus a -14.4% return for the S&P, a 47.7% 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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