Which Stocks Look Ready to Sink and Surge 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.

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 Intel (INTC), eBay (EBAY), Bank of America (BAC), Microsoft (MSFT), Intuitive Surgical (ISRG), IBM (IBM), Google (GOOG), Chipotle Mexican Grill (CMG), and McDonald's (MCD).

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

IBM has topped analyst EPS estimates each quarter over the past two years. During that period, the stock has risen the next session four of eight quarters. Seasonally, the stock has risen once in the last four years.

Last quarter, IBM's net income in Q4 rose 10% to $6.1 billion, or $5.39 a share, from $4.71 a year earlier. Revenue dropped -1% to $29.3 billion due to the sale of its retail business in the third quarter.

The results topped the $5.95 billion, or $5.25 a share, in net income on revenue of $29.05 billion that Wall Street was expecting.

"This is the 10th consecutive year of double-digit EPS growth, so a decade at a double-digit pace. And $18.2 billion of free cash flow is $12 billion higher than a decade ago. That's an increase in the cash flow we generate in a year, not a cumulative increase," CFO Mark Loughridge pointed out on IBM's conference call with analysts.

IBM guided for full-year EPS to reach at least $16.70 per share, above the $16.57 consensus analyst estimate. ...

Outside of earnings, we think IBM has one of the strongest brands in technology, and the company has done a tremendous job of transforming itself over the years, divesting businesses such as its HDD operations, PCs, and printing, while focusing on services and software. However, it hasn't given up on its hardwarebusiness, and has melded the three businesses to become the best-of-breed enterprise technology company at the forefront of some of the hottest trends in tech.

Its long-term contracts, meanwhile, create a nice recurring revenue stream and give it a strong, visible free cash flow stream. About 60% of its profits are recurring in nature. This makes it one of the most defensive businesses in tech, as well. In addition, there are high switching costs associated with moving to competitor's products, which creates a solid moat around its products and services. Software and emerging markets represent solid growth opportunities.

IBM should also enjoy a solid refresh cycle in 2013, led by new Power 7+ processors and its integrated system, PureSystems, aimed at the big data trend. ...

Just a few of the correct calls BullMarket.com made for Q4 were:

  • to be bullish on Netflix (NFLX) ahead of earnings.
  • to be bullish on Michael Kors (KORS) ahead of earnings.
  • to be bearish on Akamai (AKAM) 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 104.9% from 2009-2012 versus a 57.9% return for the S&P, a 47.0% 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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