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 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 Cree (CREE), NetApp (NTAP), Macy's (NYSE:M), Deere (DE), Cisco (CSCO), Wal-Mart (WMT), Nordstrom (JWN), and Dick's Sporting Goods (DKS).

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

Deere has beaten analyst EPS estimates six of the past eight quarters, missing the consensus twice. Over that period, the stock has risen the next session one of eight quarters. Seasonally, the stock has fallen each of the last four years.

Last quarter, the Moline, Illinois-based maker of combines, tractors, construction machinery and lawn and garden equipment said it earned $1.08 billion in Q2, equal to $2.76 per share. That's up from $1.06 billion, or $2.61 per share, in the year-earlier period and also ahead of the $2.71 per share that Wall Street had expected.

Revenue from its equipment sales grew by 9% to $10.27 billon from $9.41 billion last year. The analyst consensus estimate was $9.85 billion.

Total revenue including the contribution from Deere's financial services, which help customers finance the purchase of its equipment, also rose 9% to $10.91 billion.

Deere's performance was aided by a 3% price increase that it implemented prior to the start of the quarter and increased shipments. The price increase was partly offset by -2% of currency headwinds.

Equipment net sales in the United States and Canada increased 9% for the quarter and 13% year to date. Net sales outside of the U.S. and Canada increased by 9%, which was offset by a -4% currency headwind.

Deere's reported an operating profit of $1.66 billion from its equipment operations, compared with $1.52 billion a year ago. The financial services unit reported net income attributable to Deere of $125.0 million for the quarter compared with $109.2 million last year.

Deere guided for sales to grow by 5% for the full year, which was down from its prior 6% growth forecast, with 3% growth in the current quarter. It predicted it would report around $3.3 billion in net income, which implies a per share result of around $8.40 to $8.60 depending on the pace of its buyback program. It earned $7.63 per share in 2012. The company cited global financial pressures and adverse weather as adding a note of caution to its forecast. ...

Outside of earnings, Deere is a solid long-term play on agricultural growth and the increased food needs of a rising middle class around the globe. High crop prices, along with high farmland prices, meanwhile, have kept its customer base on solid financial footing despite the middling global economy. The company has a strong management team and a long history of solid execution.

One of the biggest questions surrounding Deere is whether the ag cycle has become less of a cycle and more of a trend, as the current strong cycle is now almost double the typical upcycle (typically five years, with the current upcycle now going on nine years). Results and guidance the past year, meanwhile, have been a bit bumpy. ...

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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