Earnings season is upon us again, and as the first companies start releasing their earnings we are going to offer investors a brief pre-earnings analysis of current and past quarters. Our focus will be on price, and how stocks might react after earnings reports based on the recent stock price changes.
We all know it is difficult to predict what a stock might do solely based on information released during earnings. Sometimes stocks go lower after beating estimates, and the reverse is true as well, so it is also important to factor in what smart money has been doing relative to the stock price.
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 17 2013.
Baxter International Inc. (BAX) is scheduled to report its Q3 earnings on Thursday October 17 before the market open. Estimates are for the company to earn $1.19 per share, which would be $0.05 better than the same quarter a year ago. Recent downgrades have pushed shares of Baxter down about 9% in the last month. Baxter counts on its hemophilia drug FVIII, which helps blood clot, for about 16% of Baxter's revenue and up to 30% of its profits. Rival Biogen Idec Inc (BIIB) is expected to introduce its own drug to compete in early 2014, which may be a longer-acting drug. Is this stock a buy on the dip?
The stock is now trading at the lowest levels since December of 2012, and has broken below long-term support. After breaking lower, long-term support is now converted resistance, and as long as the stock remains below converted resistance, as defined in our real time trading report, Stock Traders Daily expects lower levels. That would make BAX a sell/short at converted resistance, with risk controls in place if the stock can break back above converted resistance.
BB&T Corporation (BBT) is expected to report $0.70 per share for its third quarter of 2013, which would be a 6% increase from the same quarter a year ago. BBT has exceeded analyst's expectations in three of the last four quarters, as the company last missed in Q3 of 2012. BBT announced the company lost a legal dispute with the IRS, which will result in an after tax charge of $250M or $0.35/share. Despite the nonrecurring charge, the company expects to remain profitable for the quarter. The stock is down almost 8% from the year highs on August 1, should investors buy shares ahead of earnings?
The stock is trading above support, as defined in the real time trading report published by Stock Traders Daily. The stock just bounced off support about a week ago, and so far, it is holding. We caution investors not to chase the stock into earnings, as it has already begun to move higher off 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, support also acts as our risk control, and if support breaks lower, the otherwise positive bias that exists now would dissolve, and sell signals would surface. We would only be buyers if the stock moves lower and re-tests support.
Goldman Sachs Group Inc (GS) is forecast to report $2.43 per share when the company reports on Thursday October 17 before the bell. The company earned $2.85 per share a year ago in the same quarter, which was 15% higher than the forecast for Q 3 this year. The stock has pulled back about 5% from the annual highs less than a month ago. Twitter selected Goldman Sachs the lead underwriter for the highly lucrative IPO. Goldman, as lead underwriter, will get the lion's share of Twitter IPO fees, which should be a positive for the stock. Is GS a good buy ahead of earnings?
The stock recently tested support as that is defined in the real time trading report issued by Stock Traders Daily, and support held, but most importantly the stock has also already begun to move higher. By definition we prefer to buy near support levels when they are tested because that allows us to maximize our return, our target is resistance and we want to get the complete oscillation from support to resistance, but it also helps us control risk, and that is the most important part. Shares of GS are trading above support after the recent test of support, and it is far enough away from support to be unattractive to us as a new buy, especially ahead of earnings. We would avoid buying the stock at current levels, and instead watch support for a better entry level.
Verizon Communications Inc. (VZ) will report its 2013 Q3 earnings on October 17, 2013, before the market opens. The company is expected to post $0.75 per share for Q3 versus $0.64 in the same quarter a year ago, which is a 17% increase YOY. The growth of data customers in the cellular segment, along with the growth of FiOS customers in the internet and TV segments, has helped the company expand margins. The data segment of the wireless division could again show strong growth and margin expansion, which has been a driver for the stock. Shares of VZ are off over 12% from the highs earlier this spring. Is this a good time to buy shares of VZ?
The stock is near a test of long-term support, as defined in the real time trading report published by Stock Traders Daily. The stock could see a significant bounce if support holds, as shares sold off near resistance and are all the way back near 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, support also acts as our risk control, and if support breaks lower, we would be selling that position.
Navigating earnings can be tricky, sometimes investor's earnings expectations are correct, but the stocks actually do the opposite of what they think it should have done after earnings, so our opinion based on price can help make 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 listed herein for writing this article.