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 Zillow (Nasdaq:Z), Whole Foods (WFM), Disney (DIS), SodaStream (SODA), Groupon (GRPN), Green Mountain Coffee Roasters (GMCR), Priceline.com (PCLN), NVIDIA (NVDA), and Monster Beverage (MNST).

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

Whole Foods has beaten analyst EPS estimates seven of the past eight quarters, meeting the consensus once. Over that period, the stock has risen the next session five of eight quarters. Seasonally, the stock has risen each of the last four years.

Last quarter, The company reported a 24% increase in its fiscal Q1 profit to $146 million, or 78 cents per share, compared with $118 million, or 66 cents per share, a year ago. EBITDA grew by 19% to $337 million.

Total sales increased 14% to $3.9 billion, with same-store sales up by 7.2% during the period.

Margins improved during the quarter but management warned they were likely to erode as it puts more "value-priced" items on its shelves. Long known as a premium-priced grocer, Whole Foods has been expanding beyond locations where customers have been willing to pay up for its higher priced fare.

Whole Foods opened nine new stores during the quarter in Ontario, Canada; Davis, California; Littleton, Colorado; Cheltenham, England; Tampa; Boise; Orland Park, Illinois; Columbia, South Carolina; and Virginia Beach; and it relocated one new store in Tucson. The new stores range in size from 20,000 square feet to 43,000 square feet and are located in a mix of urban and suburban areas, as well as new and existing markets.

Looking ahead, Whole Foods said it is still on track to open a record number of new stores over the next two years. Management said its pre-opening and relocation costs would be back-end loaded this year.

The high-end grocer maintained guidance for full-year earnings per share of $2.83 to $2.87, even though it acknowledged that its efforts to make itself more appealing to a wider base of clients by lowering some price points would pressure margins. The company noted that 2012 contained a 53rd sales week.

Whole Foods also narrowed its 2013 forecast for same-store sales growth to a range of 6.6% to 8% from 6.5 % to 8.5% previously....

Outside of earnings, Whole Foods is a strong company that will continue to benefit from the public's embrace of natural and organic foods. Whole Foods already does very well with the Baby Boom generation because as its members age they have become more health conscious. It also does well with younger buyers that were raised eating natural foods and thus aren't converts.

The company has a long way to go to reach its goal of 1,000 stores, and we like its strategy of taking advantage of depressed real estate prices to broaden its footprint. Those new stores will only add to margins that are the envy of the grocery industry, especially since Whole Foods' more-affluent customer base willingly absorbs its higher price points.

As we've also noted in prior reports, for all the talk of food cost inflation, Americans spend on average just 8% of their household income on food, compared with 15% in the 1970s and nearly 50% a century ago. ...

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 bullish on Netflix (NFLX) ahead of earnings.
  • to be bearish on Baidu (BIDU) ahead of earnings.
  • to be bullish on Facebook (FB) 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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