Which Stocks Look Ready to Pop and Drop with Earnings?

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 Tiffany (TIF), DSW (DSW), The Fresh Market (TFM), Splunk (SPLK), Salesforce.com (CRM), Francesca's (FRAN), Lululemon (LULU), and PVH (PVH).

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

Tiffany has topped analyst EPS estimates four of the past eight quarters, missing them four times. During that period, the stock has risen the next session five of eight quarters. Seasonally, the stock has risen three of the past four years.

Last quarter, Tiffany said it earned $84 million in net income, equal to 65 cents per share, compared with $82 million, or 64 cents per share, in the year- earlier period.

Costs associated with cuts in staffing and occupancy shaved -$9 million, or -5 cents per share, from the reported results for the just-concluded quarter. Absent those costs, Tiffany's 70 cents per share in net income exceeded the 53 cents that analysts had forecast by a wide margin.

Revenue grew by 9% to $895 million from $819.2 million a year ago, which also was well above the $855.1 million analyst consensus estimate.

Sales in the Americas region, Tiffany's largest, increased by 6% to $408 million, which management said was below its expectations. Comparable-store sales rose 3% with relatively stronger growth in the New York flagship store, the company said. Sales in New York benefitted from purchases by customers who attended the Blue Book anniversary event.

In the Asia-Pacific region, total sales of $223 million were 15% higher than a year ago. On a constant-exchange-rate basis, total sales increased 14%, powered by growth in Greater China and most other countries. Comparable-store sales in the region rose 9%. Tiffany said it saw healthy sales growth across the region, led by particular strength in Hong Kong, Korea, and Singapore.

Total sales in Japan increased 2% to $145 million despite the headwind of a weakening yen.

In Europe, sales grew by 6% to $93 million. On a constant-currency basis, total sales and comparable-store sales rose 8% and 6%, respectively. ...

Outside of earnings, Tiffany remains a premier luxury brand that generates some of the highest sales per square foot in the retail space. Long term, we think the strength of its brand will drive growth in China and other countries where discretionary income is increasing.

Tiffany was overly optimistic heading into fiscal 2012 and repeatedly cut guidance last year, as sales didn't live up to expectations. This year it is taking the opposite approach, and appears to be taking a more conservative stance. The broad-based growth in Europe and Asia last quarter was encouraging and Japanese consumers took advantage of lower yen-based pricing. ...

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 Facebook's (FB) results.
  • to expect a positive reaction to Michael Kors (KORS) results.
  • to expect a negative reaction to First Solar's (FSLR) results.
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