Which Stocks Look Ready to Sink and 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 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 NetFlix (NFLX), Deckers Outdoor (DECK), Apple (AAPL), Visa (NYSE:V), Qualcomm (QCOM), Facebook (FB), F5 Networks (FFIV), Starbucks (SBUX), and Amazon.com (AMZN).

Here is just a tiny sample of what BullMarket.com wrote about F5 Networks:

F5 has beaten analyst EPS estimates five of the past eight quarters, missing the consensus twice and meeting it once. Over that period, the stock has risen the next session six of eight quarters. Seasonally, the stock has risen three times in the last four years.

Last quarter, F5 reported results that were in line with the guidance it provided in a pre-announcement on April 4th. Revenue for Q2 was $350.2 million, down -4% sequentially and up 3% year over year. GAAP EPS was 80 cents per share compared to 88 cents per share in Q1 and 86 cents per share in Q2 of last year.

Revenue rose 7% to $263.8 million, well above the $253.4 million analysts had been expecting. Retail sales increased 38% to $63.6 million from $46.2 million, while same-store sales rose 6.6%.

Adjusted EPS was $1.07 per share compared to $1.14 per share in the prior quarter and $1.09 per share a year ago.

Product revenue of $185.1 million represented 53% of total revenue, down -10% from Q2 2012. Service revenue increased 23% from a year ago to $165.1 million, accounting for 47% of revenue. Revenue from F5's Application Delivery Networking business was $345.1 million, and revenue from the ARX File Virtualization business was $5.1 million. The book-to-bill for the quarter was equal to one.

Revenue from the Americas represented 54% of total revenue, down -4% from Q2 2012. EMEA contributed 23%, up 13% year over year. Asia Pacific accounted for 16% of revenue, a 21% year-over-year increase; and Japan was 6% of revenue, a -5% decline year over year.

The company guided for Q3 revenue of $355 million to $365 million and adjusted net income of $1.06 to $1.09 per share. Both were below the Wall Street consensus estimates of $372 million in revenue and EPS of $1.13. ...

Outside of earnings, F5's stock took it on the chin after a negative earnings pre- announcement in early April, with the miss largely coming from weakness in the telecom sector. However, the telecom equipment market is lumpy, and given F5's current product refresh cycle, there is a good probability that orders were just being pushed out as new offerings were being evaluated.

One of the main bearish tenets on F5 has largely focused on the impact Software Defined Networking (SDN) (virtual) would have on its business. But as we've said before, a virtual network layer lies on top of the physical network layer, and we'd add that F5's custom OS is built to operate on a proprietary hardware platform to create a barrier to entry to protect against SDN-only based competitors.

F5's hardware growth is indeed slowing, but that's partly because the focus is moving towards high-margin software due to virtualization in data centers and networks. Meanwhile, the company has solid incremental growth opportunities in security and even perhaps Toll Free Mobile Data. ...

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.

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