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 Apple (Nasdaq: AAPL - News), Netflix (Nasdaq: NFLX - News), Caterpillar (NYSE: CAT - News), Akamai (Nasdaq: AKAM - News), Starbucks (Nasdaq: SBUX - News), Amazon.com (Nasdaq: AMZN - News), Potash Corp. (NYSE: POT - News), Cerner (Nasdaq: CERN - News), Buffalo Wild Wings (Nasdaq: BWLD - News), and Baidu (Nasdaq: BIDU - News).

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

Caterpillar is engaged in the manufacturing of construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives. Caterpillar operates in three principal lines of business: Machinery, Engines and Financial products.. ...

Last quarter, the company posted a fourth-quarter profit of 1.55 billion, or $2.32 per share, compared with $968 million, or $1.47 per share, a year earlier as sales surged 35% to $17.24 billion.

Analysts had expected a profit of $1.73 on revenue of $16.05 billion.

The company forecast a 2012 profit of $9.25 a share and revenue growth of 13%-20%.

"The first area I'd highlight is acquisitions, and in terms of executing our strategy it was a pretty high profile item. Over the past year and a half we have made three large ones: Bucyrus, EMD and MWM. Integrating them into Cat has been a high priority for us and a big focus in 2011. And while there is still much to do, we're very pleased with the progress so far," said Mike DeWalt, the company's IR


"In terms of Cat operations, our success this year has had much to do with the discipline of the Cat Production System. It's becoming a way of life at Caterpillar, and it's been the foundation that drove improvements in safety, quality, velocity and efficiency in 2011. The safety of our work force, contractors and visitors is fundamental to our values, and we're pleased that our enterprise safety metrics improved again in 2011 and are now 83% better than 2003," he said.

"For 2012 we're expecting another record year with sales and revenues in a range of $68 billion to $72 billion and profit of about $9.25 at the midpoint of that sales range. Overall, we believe the prospects for global growth have improved since we released our preliminary sales outlook last October. We're forecasting the world economy to grow at about 3.3% in 2012, a small improvement from 2011," DeWalt said. ...

Caterpillar has topped analyst EPS estimates seven of the past eight quarters, missing once. During that span, the stock has risen six of eight quarters. Seasonally, the stock has risen each of the last four years. ...

Outside of earnings, we think Caterpillar is the world's premier manufacturer of heavy-duty construction, agriculture and mining equipment and we like the potential synergies of the company's acquisition last year of mining concern Bucyrus.

That said, Caterpillar remains a very cyclical company and its success largely depends on the health of its end markets, which can be heavily impacted by the strength of the global economy. The company also relies heavily on China, so whether or not it experiences a hard or soft landing will play a big role in its operational results. ...

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 has made for Q1 so far were:

  • to be bullish on eBay (Nasdaq: EBAY - News) ahead of earnings.
  • to be bearish on Cree (Nasdaq: CREE - News) ahead of earnings.
  • to be bearish on IBM (NYSE: IBM - News) ahead of earnings.
  • to be bullish on F5 Networks (Nasdaq: FFIV - News) 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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