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Which Stocks Look Ready to Pop and Drop with Earnings Next Week?

the BullMarket.com Staff

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 a special earnings preview March supplement, BullMarket.com looks at several popular stocks, including DSW (DSW), Adobe (ADBE), FedEx (FDX), Nike (NKE), lululemon (LULU), Tiffany (TIF), Darden Restaurants (DRI), Dollar General (DG), and Oracle (ORCL).

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

DSW has topped analyst EPS estimates seven of the past eight quarters, missing once. During that period, the stock has risen the next session six of eight quarters. Seasonally, the stock has risen once in the past four years. ...

Last quarter, DSW reported a solid third quarter in November. Its reported net income for the three-month period that ended October 27th totaled $50.1 million, or $1.10 per share, compared with $53.7 million, or 75 cents per share, in the year-earlier period.

Excluding one-time items its adjusted EPS of $1.02 per share topped the prior- year's 88 cents of adjusted EPS by 15.9% and the Wall Street consensus estimate of 89 cents per share.

Its sales increased by 12% to $592.7 million from $530.7 million. Wall Street expected $588 million as sales on a same-store basis were up a solid 6.3%. Traffic, conversion, average unit retail and units per transaction were all stronger in Q3, management said.

Management raised the low-end of its full-year view by a nickel but not the top end. It expects to report full-year earnings of $3.30 to $3.40 per share. The subdued outlook for the fourth quarter reflected a drag on sales due to Hurricane Sandy and the normal conservatism of the management team.

The hurricane struck the Northeast on October 29th by DSW said it started to see slower traffic in the days leading up to landfall. Management said 100 of its stores were impacted by the storm and were forced to close for at least a day. It delayed the opening of one new store and one was so badly flooded it remained closed for several weeks. ...

Outside of earnings, we've long thought highly of the DSW model, which sells brand-name footwear at a discounted price in an attractive store setting. The company has ridden a strong footwear cycle to nice growth, and built solid brand awareness and loyalty. The move into offering a limited line of jewelry has potential to boost sales and merchandise margins.

Meanwhile, the merger with its former parent, Retail Ventures, eliminated some redundant costs and added $140 million in net operating loss (NOL) carry- forwards and tax credits that DSW has been using to reduce its effective tax rate. It has sufficient NOLs on the books to use into 2013.

In addition, DSW looks like it has solid opportunities to increase its store base and expand into more markets. ....

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 Netflix (NFLX) ahead of earnings.
  • to be bullish on Michael Kors (KORS) ahead of earnings.
  • to be bearish on Akamai (AKAM) ahead of earnings.
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