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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 its latest earnings preview, BullMarket.com looks at several popular stocks, including NetApp (NTAP), Home Depot (HD), Hewlett-Packard (HPQ), Best Buy (BBY), Toll Brothers (TOL), Target (TGT), Dollar Tree (DLTR), Abercrombie & Fitch (ANF) Dick's Sporting Goods (DKS), and Salesforce.com (CRM).

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

NetApp has beaten analyst EPS estimates six of eight quarters over the past two years, missing once and meeting forecasts once. Over that stretch, 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, NetApp said it earned $158 million, or 43 cents per share, up from $120 million, or 32 cents per share, for its fiscal third quarter ended January 2013. Excluding non-cash options expense and other items the company reported EPS of 67 cents, which easily topped the Wall Street consensus estimate of 56 cents per share.

Revenue of $1.62 million was up 4% from last year but slightly lower than the $1.63 million Street consensus.

EBITDA of $343.3 million was also significantly above the $325 million consensus estimate.

The strong EPS beat was largely due to a 12% gain in revenue from services to $340.8 million, combined with a 100 basis point improvement in the services margin. The company also did a good job managing its operating costs and its effective tax rate was lower than its guidance. Management said the tax rate reflected a prior-year discrete item and current-year cumulative benefit related to the R&D tax credit approved by Congress in early January.

Revenue from its core product segment was flat year over year at $1.06 billion, but its branded business that combines product and support grew by 7% sequentially and 8% year over year to $1.43 billion. It was about 65% of total revenue. NetApp reports revenue from product sales, which is its largest segment; software, entitlements, and maintenance; and services. It also breaks its business down between "branded" and OEM revenues. ...

Outside of earnings, companies may delay or rethink some spending, but ultimately they will need the additional storage capacity. NetApp's storage products are well regarded, especially among midmarket customers.

NetApp had some operational issues last year, not delivering on some product launches as expected and having to push them back. However, its new ONTAP 8.1.1 storage operating system and 3200 series hardware appear to be gaining traction and helping stem the tide of market share loss to storage leader EMC (EMC). ...

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 Green Mountain (GMCR) ahead of earnings.
  • to be bearish on Deere (DE) ahead of earnings.
  • to be bullish on Netflix (NFLX) ahead of earnings.
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