Which Stocks Look Ready to Pop or Drop After 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 20- to 30-page Earnings Preview report for the week ahead each Friday.

In its latest earnings preview, BullMarket.com looks at several popular stocks, including Intuitive Surgical (ISRG), Intel (INTC), IBM (IBM), eBay (EBAY), Kinder Morgan (KMP), Chipotle Mexican Grill (CMG), Bank of America (BAC), and Google (GOOG).

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

IBM has topped analyst EPS estimates seven of eight quarters over the past two years, missing once. During that period, the stock has risen the next session four of eight quarters. Seasonally, the stock has fallen each of the last four years. ...

Last quarter, IBM said its Q2 adjusted income grew by 3%, excluding a $1 billion restructuring charge, to $4.3 billion, or $3.91 a share, compared with $3.51 a year ago. The result topped the Street consensus estimate of $3.77 per share.

On a GAAP basis, earnings fell by -17% to $3.2 billion, or $2.91 per share. Revenue slid by -3% to $24.9 billion. Wall Street was looking for $25.4 billion.

On a currency neutral basis, software revenue grew by 5% and its mainframe revenue rose 11%. Currencies shaved about -$500 million from overall revenue, the company said.

Gross margin improved by 1.5 percentage points, led by services and a mix shift to more profitable segments. ...

Outside of earnings, we think IBM has one of the strongest brands in technology, and the company has done a tremendous job of transforming itself over the years, divesting businesses such as its HDD operations, PCs, and printing, while focusing on services and software. However, it hasn't given up on its hardware business, and has melded the three businesses to become the best-of-breed enterprise technology company at the forefront of some of the hottest trends in tech.

Its long-term contracts, meanwhile, create a nice recurring revenue stream and give it a strong, visible free cash flow stream. About 60% of its profits are recurring in nature. This makes it one of the most defensive businesses in tech, as well. In addition, there are high switching costs associated with moving to competitor's products, which creates a solid moat around its products and services. Software and emerging markets represent solid growth opportunities.

IBM should also enjoy a solid refresh cycle in 2013, led by new Power 7+ processors and its integrated system, PureSystems, aimed at the big data trend. ...

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 Q2 so far were:

  • to expect a positive reaction to Tesla's (TSLA) results.
  • to expect a positive reaction to Priceline.com's (PCLN) results.
  • to expect a negative reaction to First Solar's (FSLR) results.
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