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 20- to 30-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 Intuitive Surgical (ISRG), Intel (INTC), IBM (IBM), Cree (CREE), eBay (EBAY), Kinder Morgan (KMP), Microsoft (MSFT), Chipotle Mexican Grill (CMG), McDonald's (MCD), and Google (GOOG).

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

Intuitive Surgical has beaten analyst EPS estimates each quarter over the past two years. During that span, the stock has risen the next session four of eight quarters. Seasonally, the stock has risen once in the last four years.

Last quarter, the company said its second-quarter net profit rose to $155 million, or $3.75 per share, from $117.4 million, or $2.91 per share, a year ago. The result was 19 cents better than the analyst consensus estimate. Revenue for the quarter grew by 26% to $537 million. Wall Street was looking for

$522.8 million.

Breaking down the results, systems revenue was $229 million, an increase of 23% compared with $187 million during the second quarter of 2011. The growth in second-quarter 2012 systems revenue was driven by sales of 150 da Vinci Surgical Systems compared with 129 system sales during the same period last year.

The company said its average sales price per system was $1.53 million, an increase from the $1.44 million realized in the second quarter of 2011 and $1.47 million realized in the first quarter. ASPs include all da Vinci models, all Simulators, and FireFly when configured with the system, but exclude upgrades.

Service revenue increased 23% to $83 million from $68 million during the second quarter of 2011, reflecting growth in the installed base of da Vinci Surgical Systems.

Instrument & Accessories revenue jumped by 30% to $224 million compared with $172 million a year ago and up 8% from $208 million in Q1. ...

Outside of earnings, we've always liked Intuitive Surgical's business model. It is really just another version of the old razor and blade model, only pricier. While system sales are important, over time procedure-related recurring revenue should continue to outpace the hardware sales and drive growth, especially as both patients and physicians are favoring less-invasive surgical procedures.

Intuitive Surgical's strategy is focused on growing its core gynecology and urology procedures business; executing smooth introductions of new products like its Single-Site and Vessel Sealing applications to customers; and building a pipeline for its emerging procedures business in general surgery, thoracic surgery and trans-oral surgery. Another focus is on international markets, particularly Europe, Japan, and Korea.

Products like the FireFly system -- which allows surgeons to monitor blood flow beneath tissue surfaces in real time and can help them do such things as find cancerous tumors during surgery and identify lymph nodes that could become cancerous -- could also be a big growth driver. Right now, it is about a $100,000 accessory and is gaining traction in kidney-related surgeries, but with patients increasingly demanding less invasive procedures and hospitals competing for their business, that may not be a big price for them to pay. ...

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 Qualcomm (QCOM) ahead of earnings.
  • to be bullish on Fusion-IO (FIO) ahead of earnings.
  • to be bearish on Facebook (FB) 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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