Which Stocks Look Ready to Surge and Sink 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.

In its latest earnings preview, BullMarket.com looks at several popular stocks, including Herbalife (HLF), Coach (COH), 3D Systems (DDD), Whole Foods (WFM), SodaStream (SODA), Mastercard (MA), OpenTable (OPEN), LinkedIn (LNKD), and Enterprise Products Partners (EPD).

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

SodaStream has topped analyst EPS estimates each quarter over the past two years. During that period, the stock has risen the next session three of eight quarters. Seasonally, the stock has fallen each of the past two years.

Last quarter, the company reported Q1 results in May. SodaStream said it earned $12.1 million, or 57 cents per share, in the March quarter, up from $10.1 million, or 48 cents per share, a year earlier. Excluding items, it reported EPS of 68 cents, which was three cents above the consensus.

Revenue grew by 34% to $117.6 million due to strong sales in the Americas and Western Europe. Wall Street was looking for total revenue of $115.5 million.

Sales of gas refills and flavors rose 19.6% to $72 million. Soda maker starter kit sales climbed 9.5% to $43 million.

On a unit basis, Soda Makers increased 78%, flavors increased 119%, and gas refills rose 101%. First quarter gas refills of 1.1 million mark the first time quarterly refills surpassed 1 million units in the U.S. ...

It is abundantly clear that SodaStream is, at this point, a rapidly growing company. That cannot be denied. The debate has always centered on how big it can truly get. Bulls point to the popularity of Green Mountain Coffee Roasters (GMCR) and its Keurig coffeemakers and coffee pods as evidence of the potential of SodaStream. We have always been skeptical of that analogy.

The biggest problem we see with that train of thought is that North American consumers have a long tradition of brewing coffee at home. Americans aren't in the habit of making their own colas. We specifically are focusing on the behavior of Americans because, let's be real, in order for SodaStream to be the transformative business it claims it wants to be it must become a huge success in the U.S. Modest success in the U.S. won't cut it.

So the transition to the simplicity of Keurig's coffee pods isn't a huge behavioral change. Making soda at home is much more of a leap. We do think it appeals to the green crowd and if the company can convince consumers its homemade drinks are healthier than the traditional versions it will draw in more of those consumers as well, but is that enough?

Meanwhile, it looks like the aforementioned Green Mountain may get in on the soda-making fun, adding to the competition in the space.

Having said all that, we think SodaStream is well run and the razor-and-blades business model makes sense. ...

Over time it is inevitable that comps will slow as Whole Foods gets bigger but it still holds a unique position in the grocery industry. Its customers visit the store for the quality of the food it sells, much of it organic, and for the ambiance of the stores. It appeals to a higher demographic that is willing to pay higher prices, but those customers are also certainly happy for a deal when available. We don't see management's new value-oriented pricing effort driving those customers away while it should draw in new ones. ...

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 Q2 so far were:

  • to expect a positive reaction to Facebook's (FB) results.
  • to expect a positive reaction to Herbalife's (HLF) results.
  • to expect a negative reaction to Coach's (COH) 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.)

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