By Neal Rau
Earnings season is just getting under way, and a few very important earnings releases are coming over the next few days. We have conducted an analysis of these companies in order to provide investors with a summarized earnings analysis (both past and present), but also, and more importantly, a price-based observation that might be better suited for investors who are anticipating price action after earnings are released.
Of course, we already know that stocks sometimes do the exact opposite of what we might expect after earnings. A stock might fall after it beats estimates, or increase after a miss, so although an evaluation of earnings data is clearly important, a close look at the recent decisions of smart money is as well.
This combination of simple earnings data and price-based analysis can help investors not only understand earnings results, but also anticipate the stock's move after earnings are released.
The following Companies report earnings on October 15 2013.
Charles Schwab Corp. (SCHW) last issued its quarterly earnings data on Tuesday, July 16. The company reported $0.18 EPS for the quarter, missing the consensus estimate of $0.19 by $0.01. The company had revenue of $1.34 billion for the quarter, compared to the consensus estimate of $1.32 billion. During the same quarter in the previous year, the company posted $0.20 earnings per share. The company's revenue for the quarter was up 4.2% on a year-over-year basis. Analysts expect Charles Schwab Corp to report $0.20 for the third quarter in 2013. Charles Schwab Corp had enjoyed a nice run on the charts, up until its recent downturn. Since the beginning of the year, the stock has moved up 45%, outperforming the broader S&P 500. After about an 8% pullback over the past 3 weeks, should investors buy SCHW now?
Investors need to be aware of price, and based on the Stock Traders Daily real-time trading report, the stock is moving closer to long-term support, but isn't there yet. If the stock continues to move lower, and tests long-term support, we would be buyers near support. If support holds, we would expect a move higher and an eventual test of resistance. We would only be buyers near support and caution investors not to chase the stock.
Citigroup Inc (C) will report earnings ahead of the open on Tuesday Oct. 15, and analysts are expecting a profit of $1.07 per share, a penny better than the same quarter a year ago. C has beaten estimates in 6 of the last 8 quarters, but the stock hasn't performed well following the recent reports, as the stock didn't finish more than 1% higher in 5 of the 8 trading sessions following the earnings report. Is this the time to buy C before earnings?
According to the real-time trading report offered by Stock Traders Daily, shares of C are getting close to a test of support, and as a rule we are buyers if support is tested (it is not there yet). From there, as long as the stock remains above support we would expect a full oscillation to resistance again, so if the stock does test support we would be buyers, expecting higher levels and a test of resistance. However, support also acts as our risk control, and if support breaks lower, we would be selling that position.
The Coca-Cola Company (KO) is set to report earnings on Tuesday October 15 before the market open. The company is expected to report EPS of $0.54, which would be 3 cents better than the same quarter a year ago. The company has met or beaten estimates in 8 of the past 9 quarters. Coca-Cola recently lost its top brand value spot to Apple Inc. (AAPL), in addition the stock has fallen almost 14% from the year highs back in May. Should investors buy after the dip?
Last quarter KO reported in-line Q2 EPS on lower-than-expected revenue, and the stock fell over 3% the following day. Right now, the most important factor is price, and according to the Stock Traders Daily real-time trading report, the stock is getting closer to a test of long-term support. As a rule, we are buyers near support, and as long as the stock remains above support, we expect higher levels and a test of resistance. However, we would not enter the trade unless support is tested, investors might have an opportunity to buy at support if the stock falls after the earnings report on Tuesday. Watch support closely and use it to control risk, if support breaks lower, we would be sellers of that position.
Johnson & Johnson (JNJ) is scheduled to report earnings of Tuesday October 15. The company is expected to report EPS of $1.32, which would be a 6% increase over the same quarter a year ago. JNJ last reported on July 16, and the company announced sales of $17.9 billion for the second quarter of 2013, an increase of 8.5% as compared with the second quarter of 2012. The stock is up 22% YTD, however shares are down almost 9% from the yearly highs on August 1. Should investors be buying on the pullback going into earnings?
The stock is near a test of long-term support, as defined in the real time trading report published by Stock Traders Daily, and that makes us interested in JNJ as long as support holds. As a rule, we are buyers near support, and as long as the stock remains above support, we expect higher levels and a test of resistance. However, support also acts as our stop loss and if support breaks lower the otherwise positive bias that exists now would dissolve, and sell signals would surface. We keep our risk in check by limiting our entry levels to when support levels are tested, which also helps us maximize return because if long-term support holds we can take advantage of the entire oscillation from support to resistance.
Navigating earnings can be tricky. Sometimes investor's earnings expectations are correct, but the stock actually does the opposite of what they think it should have done after earnings, so our opinion based on price can help investors make more well-rounded and sound investment decisions.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Business relationship disclosure: By Neal Rau for Stock Traders Daily and neither receives compensation from the publicly traded companies mentioned herein for writing this article.