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.

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 Apple (AAPL), Netflix (NFLX), Deckers Outdoor (DECK), Yum Brands (YUM), Caterpillar (CAT), Cree (CREE), Coach (COH), Qualcomm (QCOM), F5 Networks (FFIV), Akamai (AKAM), Starbucks (SBUX), Baidu (BIDU), and Amazon.com (AMZN).

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

Starbucks has surpassed analyst EPS estimates five of the past eight quarters, missing the consensus once and meeting it twice. During that time, the stock has risen the next day four of eight quarters. Seasonally, the stock has risen twice in the past four years.

Last quarter, strong results out of its core U.S. operations helped drive the company's Q1 results, which was in line with Wall Street's expectations at the time. Starbucks reported a 13% increase in its net income, aided by a 6% increase worldwide in its sales on a same-store basis.

The comparative store growth in the U.S. market was 7%. Same-store sales grew by an even stronger 11% in China and the Asia Pacific region aided by increased traffic at its stores. Europe remained a weak market, with comps down -1% even though traffic was stronger than in the year-earlier period.

CFO Troy Alstead said European customers were trading down to lower-priced beverages. They also bought fewer food items.

Starbucks reported a profit of $432.2 million, or 57 cents per share, which was up from $382.1 million, or 50 cents per share, in the year-earlier period. Sales grew by 11% to $3.8 billion.

Wall Street was looking for 57 cents per share in earnings on $3.85 billion in sales. ...

Outside of earnings, Starbucks has generally performed well and it has solid growth opportunities ahead via international expansion, especially in China, the rest of Asia and parts of Latin America. The extent of the growth potential in the U.S. is still quite surprising, with the acquisitions (tea retailer Teavana, La Boulange Bakery, and a small juice maker called Evolution Fresh) the company has made in recent months behind some of the growth. All three should helpexpand the appeal of Starbucks if the integrations are well executed. None, we should note, were overly expensive for the company. Expanded food and beverage offerings should drive day-part expansion, which is a classic move from the QSR playbook, as is remodeling older stores.

A more favorable commodity cost environment bodes well for margins. The company's move into the consumer channel (K-Cups, Via instant coffee packs, and so on) is also a strategy we like given the strength of the Starbucks brand. K- Cups alone should add some nice growth and Verismo appears off to a solid start. We like the move to tie grocery purchases to the overall rewards program. ...

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 bearish on Bank of America (BAC) ahead of earnings.
  • to be bearish on IBM (IBM) ahead of earnings.
  • to expect a muted response to Intel's (INTC) results.
  • 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.)

    Rates

    View Comments (0)