Which Stocks Look Ready to Sink or Surge 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.

In its latest earnings preview, BullMarket.com looks at several popular stocks, including Yelp (YELP), Herbalife (HLF), First Solar (FSLR), Apple (AAPL), LinkedIn (LNKD), Baidu (BIDU), 3D Systems (DDD), Starbucks (SBUX), and Facebook (FB).

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

First Solar has beaten analyst EPS estimates three of the past eight quarters, missing five times. Over that period, the stock has risen the next session two of eight quarters. Seasonally, the stock has risen once in the last four years. ...

Last quarter, the largest U.S. manufacturer of solar panels said its second-quarter profit fell to $33.6 million, or 37 cents a share, from $111 million, or $1.27, a year earlier.

Excluding one-time items its per-share profit equaled 14 cents, well below the 53 cents that analysts had projected.

The Tempe, Arizona-based company said sales plunged by -46% to $519.8 million from $957.3 million.

Gross margin in the second quarter was 27%, up from 22.4% in the prior quarter. The sequential gross margin increase is primarily attributed to favorable systems project mix, lower module-only sales, and lower manufacturing cost per watt, management said.

First Solar reduced its headcount in its first quarter, which is expected to save the company $30 million in costs annually, split evenly between cost of sales and selling, general and administrative expenses.

The company revised its full-year earnings outlook down to a range of $3.75 to $4.25 per from its earlier forecast of $4 to $4.50. Sales are expected to range from $3.6 billion to $3.8 billion. ...

Outside of earnings, it's difficult to remember, but in 2008 this was a $300-plus stock that investors were tripping over themselves to buy. Early on, First Solar's advantage was that its thin-film panels were cheaper to produce than the comparable silicon-based panels made by its competitors. The cost advantage stemmed in large measure from a silicon shortage at the time that drove up material costs.

As far back as 2007, we pointed out that the silicon shortage would ultimately fade and along with it First Solar's advantage over Chinese solar panel makers. In fact, in May 2007 we wrote: "Looking out two years, the picture grows a bit murkier as the silicon shortage will loosen its grip on the industry and silicon solar cell makers are poised to improve the efficiency of their cells further. Meanwhile, emerging solar cell technologies may relieve First Solar of the low- cost crown... Over the long term, the factors noted above will diminish the advantages that First Solar currently holds."

This scenario started playing out at the beginning of 2009, and it has been a rough ride for the stock since. In response, First Solar has moved towards an EPC (Engineering, Procurement and Construction) model, but newer projects have tended to be higher risk and lower margin than in the past. ...

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 so far were:

  • to expect a positive reaction to Google's (GOOG) results.
  • to expect a negative reaction to Cree's (CREE) results.
  • to expect a positive reaction to Deckers Outdoor's (DECK) results.
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