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Which Stocks Look Ready to Sink and Surge 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 Yum Brands (YUM), Chipotle Mexican Grill (CMG), Hain Celestial (HAIN), Panera Bread (PNRA), Shutterfly (SFLY), Yelp (YELP), Visa (NYSE:V), LeapFrog (LF), Akamai (AKAM), Baidu (BIDU), Nuance Communications (NUAN), and LinkedIn (LNKD).

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

Chipotle has beaten analyst EPS estimates six of the past eight quarters, missing the consensus twice. Over that period, the stock has risen the next session two of eight quarters. Seasonally, the stock has risen three times the last four years. ...

Last quarter, the quick service restaurant reported a 20% increase in profit to $72.3 million, or $2.27 per share, from $60.4 million, or $1.90 per share, a year ago.

Revenue jumped 18% to $700.5 million, while same-store sales rose 4.8%.

Analysts were looking for EPS of $2.29 on sales of $702.9 million and same- restaurant sale comps of 4.9%.

(Note that the company did have about $1 million in bad debt expense related to general contractor insolvencies, which if treated as a one-time item would have allowed it to meet the EPS consensus.)

Turning to some other metrics, restaurant level operating margin increased 70 basis points to 27.4% in the quarter, helped by leverage from higher average restaurant sales. Food costs were 32.6% of revenue, down -50 basis points from last year, while labor costs were 23.2% of sales, a decrease of -10 basis points year over year. G&A expenses were 6.9% of revenue, up 60 basis points. ...

OOutside of earnings, while Chipotle is still putting up solid numbers, its growth has slowed considerably while competition has picked up. Taco Bell's Doritos Locos tacos and new upscale Cantina Bell menu have been becoming increasingly popular, breathing life back into the chain, while Qdoba is also a solid competitor.

The company also currently has a very limited menu, which could limit growth in the near term and also makes daypart expansion difficult. The company is testing a new tofu offering (sofritas) as well as catering, but we don't think these will be big enough drivers to re-energize its growth in the near term.

The company is also slow cooking its international and ShopHouse expansion plans, but both could be strong potential growth drivers if they continue to test well. We think bringing both international expansion and ShopHouse along slowly is the right move. ...

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 Qualcomm (QCOM) ahead of earnings.
  • to be bearish on Bank of America (BAC) ahead of earnings.
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