Which Stocks Look Ready to Surge or Sink After 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 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 Panera Bread (PNRA), Cree (CREE), F5 Networks (FFIV), Linn Energy (LINE), Microsoft (MSFT), Deckers Outdoor (DECK), and Amazon.com (AMZN).

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

Microsoft has beaten EPS estimates five of the last eight quarters, meeting them once and missing twice. Over that period, the stock has risen the next session five of eight quarters. Seasonally, the stock has risen three times in the last four years. ...

Last quarter, Microsoft reported net income of $4.97 billion, or 59 cents per share, for the quarter that ended June 30th. The results reversed a year- earlier loss of -$492 million, when it wrote off almost the entire value of its 2007 purchase of online ad service provider aQuantive.

The most-recent period reflected a write-down of -$900 million in unsold Surface RT tablet inventory. Excluding that charge, Microsoft said it earned 66 cents per share, but that was well short of the 75-cent per share analyst consensus.

Revenue grew 10% to $19.90 billion, which also fell short of the $20.72 million Wall Street had expected. ...

Outside of earnings, the big news for Microsoft is the announcement that CEO Steven Ballmer will step down and the acquisition of Nokia's handset business.

While Wall Street cheered Ballmer leaving, the company still needs a new CEO who is willing to think outside the box and who will be able to make some wide, sweeping changes. With founder Bill Gates on the search committee and still very much having a large say in the direction of the company, we don't know if he will be looking for this type of CEO.

The purchase of Nokia's troubled handset business is a bit of a head scratcher. Microsoft has never found much success with devices outside of the X-Box, with the Zune and Surface tablet two notable examples. And while Nokia's newer Lumia smartphone had good hardware, it was Microsoft's operating system that it was using that was considered its biggest weakness.

That said, Microsoft doesn't get the credit it deserves in certain areas, including cloud computing with Azure, which is doing very well. Its Server & Tools division has been posting very good results, while Xbox and Kinect have also been winners. However, the company has already screwed up with its policies for the newest iteration of the gaming console (such as mandating that the device connect to the Internet every 24 hours) and has had to backtrack.

Windows 8, meanwhile, doesn't appear to have the same adoption rate as past refresh cycles, and the overall PC market remains very weak. ...

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 positive reaction to Kinder Morgan's (KMP) results.
  • to expect a negative reaction to IBM's (IBM) results.
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