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.

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), IBM (IBM), Intuitive Surgical (ISRG), Google (GOOG), Cree (CREE), Netflix (NFLX), F5 Networks (FFIV), Check Point Software (CHKP), McDonald's (MCD), Starbuck's (SBUX), and Microsoft (MSFT).

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

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

Last quarter, Microsoft said it earned $5.7 billion, or 68 cents per share, for its fiscal first quarter. That compared with net income of $5.4 billion, or 62 cents per share, at the same time last year. The results were in line with Wall Street's expectations.

Revenue increased by 7% to $17.37 billion, which was about $130 million above analyst forecasts.

Windows Division revenue declined 9% and lagged the PC market due to OEM inventory draw down prior to the Windows 8 launch and the ASP dynamics of emerging markets relative to developed markets, the company said.

Microsoft Business revenue grew 1%. Business revenue grew 3% and within that multiyear licensing revenue grew 8%. Consumer revenue declined -8%.

The Server and Tools division reported over 20% bookings growth and 8% revenue growth. Enterprise Services grew 13% and multiyear licensing revenue grew 19%, driven by new customers.

Online Services Division revenue grew 9%. Online advertising revenue was up 15%, driven primarily by rate improvement in search, offset in part by a decline in display revenue. Operating performance improved by $150 million, or 29%, the company said. Entertainment and Devices Division, revenue declined -1%. ...

Outside of earnings, 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, though Xbox is getting long-of-tooth and probably needs a refresh to re-energize sales.

Windows 8, however, doesn't appear to have the same adoption rate as past refresh cycles, and the overall PC market remains weak. The Surface tablet looks interesting, but Microsoft doesn't have a very good track record on the hardware side of the business, and sales thus far look uninspiring.

Excluding its roughly $6.38 per share in net cash, the stock trades at just under 6.5x the fiscal 2014 (ending June) consensus of $3.20. ...

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 Q4 so far were:

  • to be bullish on eBay (EBAY) ahead of earnings.
  • to be bullish on Goldman Sachs (GS) ahead of earnings.
  • to be bearish on Intel (INTC) 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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