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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 VMware (VMW), Caterpillar (CAT), Broadcom (BRCM), Amazon.com (AMZN), Skywork Solutions (SWKS), Qualcomm (QCOM), Fusion-io (FIO), Facebook (FB), Potash (POT), Mastercard (MA), and Enterprise Products Partners (EPD).

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

Caterpillar has beaten analyst EPS estimates seven of eight quarters over the past two years, missing the consensus once. During that span, the stock has risen the next session six of eight quarters. Seasonally, the stock has risen twice in the past four years. ...

Last quarter, Caterpillar said it earned $1.70 billion, or $2.54 per share, which was up 49% from $1.14 billion, or $1.71 per share, in the year-earlier period. The most-recent quarter included a pre-tax gain of $273 million from Caterpillar's sale of a majority interest in its third-part logistics business.

Excluding the gain from the sale of the logistics business, the company earned $2.26 per share, which topped the Wall Street consensus estimate of $2.22.

Reported sales rose by 5% to $16.45 billion, which was short of the $16.77 billion Street consensus.

Currency headwinds shaved about -$247 million from reported sales because the U.S. dollar was generally stronger versus the euro and Brazilian reais than it was in the year-earlier period.

Breaking down the results, sales in North America were up 9%; sales in Asia/Pacific grew by 8%; and sales in EAME and Latin America were about flat. Caterpillar said the increase in North America was primarily driven by stronger sales of construction equipment in the U.S., which it called a "relative bright spot." While improving, sales in the U.S. are still well below peak levels for Caterpillar.

By segment, most of the sales and revenues increase was in Resource Industries, with sales up 13% year over year, reflecting the acquisition of Bucyrus. Power Systems' sales were up 5%, while Construction Industries' sales were about flat, and Financial Products' revenues were up 3%. All Other segment sales were down -31%, primarily due to the sale of most of the third-party logistics business.

CAT Financial, which the company reports separately, earned $109 million on $678 million in revenue. The bottom line grew by 17%. ...

Outside of earnings, Caterpillar remains the world's premier manufacturer of heavy-duty construction, agriculture, and mining equipment, and we like the synergies it has seen thus far with Bucyrus. It is still a very cyclical company, however, and its success largely depends on the health of its end markets.

If the company is right that the global economy isn't headed for recession, then we continue to believe Caterpillar has the potential to be a $150 stock in a few years -- although its recently lowered long-term view suggests reaching that target could take longer than we originally might have thought. It also remains a solid play on Chinese growth. ...

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 Cree (CREE) ahead of earnings.
  • to be bearish on Bank of America (BAC) ahead of earnings.
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