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.

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 Macy's (NYSE:M), Jack in the Box (JACK), Deere (DE), Cisco (CSCO), The Gap (GPS), Wal-Mart (WMT), Nordstrom (JWN), and Dick's Sporting Goods (DKS).

Here is just a tiny sample of what BullMarket.com wrote about Jack in the Box:

Jack in the Box has topped analyst EPS estimates six of eight quarters over the past two years, missing twice. During that period, the stock has risen the next session four of eight quarters. Seasonally, the stock has risen three times in the past two years.

Last quarter, the quick-serve chain posted a profit from continuing operations of $23.9 million, or 54 cents a share, compared to $12.0 million, or 27 cents a share, a year earlier. Excluding restructuring costs, adjusted EPS was 55 cents. Analysts were looking for EPS of 39 cents.

Operating EPS was 54 cents versus 25 cents last year.

Revenue rose to $465.5 million from $457.9 million a year ago, and topped estimates of $457.8 million. Comparable-store sales at its namesake restaurants rose 1.9% during the quarter, with company-owned same-store sales also up 2.1% and franchise same-store sales up 1.8%. A year ago, system-wide same- store sales rose 3.6%.

At Qdoba, meanwhile, same-store sales rose 1.0% versus a 3.8% increase last year. Company-owned same-store sales were up 1.5%, while franchise same- store sales edged up 0.5%.

Restaurant operating margins rose 220 basis points to 15.7% from 13.5% a year ago, and were up 60 basis points sequentially. Jack in the Box restaurant operating margins climbed 320 basis points to 17.1%, while Qdoba's fell -40 basis points to 11.6%. ...

Outside of earnings, we've long been fans of Jack in the Box's ongoing transformation to a largely franchised fast-food operator -- a little too soon actually, as the Great Recession helped derail its impact -- and with the transformation now nearly complete, the restaurateur is showing the operating leverage and margins we thought were possible. In addition, free cash flow should also start to ramp up given its solid rental revenue stream (as a result of the refranchising), along with the recent sale of its distribution business, which will decrease working capital needs. This should lead to the company more aggressively buying back stock, which in turn should boost EPS.

Jack has also done a very good job with menu innovation, marketing, its re- imaging campaign, and increasing its speed of service, all of which help drive sales. It also has smartly expanded into congruent markets, and given its largely West Coast presence, it still has room to slowly expand eastward.

While Qdoba growth has slowed recently, we remain big believers in the concept and think management can improve the business much in the same way they turned around its namesake concept. The unit should also start to gain more scale as Qdoba unit growth is ramped up over the next few years. ...

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 Q1 so far were:

  • to be bullish on Green Mountain (GMCR) ahead of earnings.
  • to be bearish on Baidu (BIDU) ahead of earnings.
  • to be bullish on Whole Foods (WFM) ahead of earnings.
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