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Which Stocks Look Ready to Pop and Drop with Earnings This 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 Herbalife (HLF), Buffalo Wild Wings (BWLD), Enterprise Products Partners (EPD), 3D Systems (DDD), Visa (NYSE:V), MasterCard (MA), CVS Caremark (CVS), OpenTable (OPEN), Facebook (FB), and LinkedIn (LNKD).

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

Visa has beaten analyst EPS estimates each quarter over the past two years. Over that stretch, the stock has risen the next session five of eight quarters. Seasonally, the stock has risen twice in the last four years.

Last quarter, Visa reported net income of $1.3 billion, or $1.93 per share, for its fiscal Q1 that ended December 31st. It earned $1.03 billion, or $1.49 per share, a year earlier. The company said its latest results included a tax benefit of 11 cents per share. Revenue rose nearly 12% to $2.85 billion.

Wall Street was anticipating earnings of $1.79 per share on revenue of $2.82 billion.

The company said the third-quarter results benefited from a lower level of incentive payments to clients to encourage use of its network. Incentive payments equaled 16.3% of gross revenue, which was below full-year guidance. The company said those payments would increase over the course of the year. It guided for client incentives to range from 18.0% to 18.5% of gross revenue.

Looking at some of the metrics, debit volumes in the U.S. declined -4% from a year earlier, but that was an improvement from the -6% decline in the year-earlier period. Interlink payment volume growth in the U.S., which was the segment of Visa's business directly impacted by the Durbin rules, was off -44% versus -48% in the September quarter. Interlink is a small slice of Visa's overall business.

Payments volume growth on a constant dollar basis for the three months ended September 30th, 2012, on which fiscal first-quarter service revenue is recognized, was up 6% over the prior year at $1.0 trillion. Payments volume in the December quarter grew by 9% over the prior year to $1.1 trillion. ...

Outside of earnings, Visa is a cash machine that is riding a huge secular trend as consumers worldwide move away from cash in favor of electronic payments. Management says that despite Visa's success at increasing the penetration of electronic payments, the total opportunity to take share from cash and checks has actually grown since its IPO, driven by population growth and the expansion of emerging economies where the use of credit and debit cards is still slim.

In addition, we think if Visa is forced to purchase Visa Europe, that while there are a few negatives, overall it would be a good development. Meanwhile, we view locking up one of its biggest customers JP Morgan Chase (JPM) as a positive, and think its innovative Chase Merchant Services could help Visa gain share and become a model for other issuers....

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 Netflix (NFLX) ahead of earnings.
  • to be bearish on Baidu (BIDU) ahead of earnings.
  • to be bullish on Coach (COH) ahead of earnings.
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