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.

In its latest earnings preview, BullMarket.com looks at several popular stocks, including NetFlix (NFLX), Deckers Outdoor (DECK), Apple (AAPL), Visa (NYSE:V), Qualcomm (QCOM), Facebook (FB), F5 Networks (FFIV), Starbucks (SBUX), and Amazon.com (AMZN).

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

Deckers has beaten analyst EPS estimates seven of eight quarters over the past two years, missing forecasts once. Over that stretch, the stock has risen the next session four of eight quarters. Seasonally, the stock has risen three times in the last four years.

Last quarter, Deckers posted a profit of $1.0 million, or 3 cents per share, for the March quarter, compared to $8.0 million, or 20 cents per share, a year earlier. Analysts were looking for a loss of -10 cents per share.

Revenue rose 7% to $263.8 million, well above the $253.4 million analysts had been expecting. Retail sales increased 38% to $63.6 million from $46.2 million, while same-store sales rose 6.6%.

Domestic sales advanced 7% to $182.7 million, while e-commerce sales increased 23% to $26.6 million. International sales jumped 7% to $81.1 million, up from $75.7 million last year.

Gross margins climbed 80 basis points to 46.8%.

UGG sales jumped 8% to $170.6 million from $158.1 million. Inventories rose 23% from a year ago, with UGG inventories up 27%.

Looking forward, the company reiterated its full-year guidance of 7% revenue growth and for EPS to increase 5%. Gross margins are expected to decline to be 46.5%. For Q2, it is looking for sales to be flat and EPS to decrease to -$1.10 versus the consensus for a -95 cent loss. ...

Outside of earnings, after a difficult 2012, we think Deckers looks poised for a turnaround for several reasons. For one, guidance appears very conservative as management is factoring in a similar level of cancellations compared to last year, which looks highly unlikely given that inventory at its wholesale accounts is well below 2012 levels. When these cancellations don't come to fruition, the company will likely raise guidance later in the year ahead of the important holiday quarter.

In addition, gross margins should continue to improve this year as a result of lower sheepskin cost (its biggest input cost) and the introduction of UGG Pure, which is about half the price of sheepskin. UGG Pure will likely be used to save costs on the inside footbed of some products, and some products using UGG Pure may specifically be designed for its outlet stores.

We've also heard very good things about Deckers' UGG 2013 fall and winter collections. While largely a winter play, the Nordstrom Anniversary Sale in mid to late July helps give an early indication to how its newer styles are received by consumers and could be a catalyst. ...

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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