By Neal Rau
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 21 2013.
VF Corp (VFC) is expected to report Q3 earnings of $3.77 per share when the company releases its quarterly results on Monday October 21 before the market open. If the VF Corp can meet the analyst estimates, it will be a 7% YOY gain. Last quarter the company beat the consensus estimate of $1.17 by $0.10, and revenues rose 3.7% YOY. Driven by the strength in outdoor action sports, and direct to consumer businesses, VF Corp was able to post the highest gross margins for any quarter in the company's history. The stock is up 32% YTD and up over 50% in the last two years. Should investors buy shares of VFC ahead of earnings?
Right now, the most important factor is price, and according to the Stock Traders Daily real-time trading report, the stock bounced higher after testing support about a week ago. 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 again (we don't chase stocks), and would avoid buying ahead of earnings at the current price. Investors might have an opportunity to buy at support if the stock falls after the earnings report on Monday. Watch support closely and use it to control risk, if support breaks lower, we would be sellers of that long position.
Helix Energy Solutions Group Inc. (HLX) is expected to report Q3 earnings after the market close on Monday. Analyst estimates are for the company to earn $0.29 per share, which would be $0.06 less than the same quarter a year ago. Helix Energy has missed estimates in three of the previous four quarterly reports, however the stock is up 21% YTD. The stock has fallen more than 11% from its yearly highs made about a month ago. Is the recent dip a buying opportunity ahead of earngings?
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 HLX 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.
Texas Instruments Incorporated (TXN) is expected to announce its third quarter earnings on Oct 21 after the market close. The company last reported earnings in July, when it said net income jumped to $660 million, or 58 cents a share, from $446 million, or 38 cents a share, in the 2012-second quarter. Recent strength in the automotive and industrial markets has led to greater demand for Texas Instruments' chips. Is the stock a buy, sell or hold ahead of earnings?
The stock is up over 45% YTD, and trading close to its 52-week high. The stock is very close to a test of long-term resistance, and right before earnings. Even if the company beats estimates handily, it does not mean the stock will continue to rise, as price matters. According to rule, we are sellers at resistance, and as long as the stock remains below resistance, we expect lower levels and a test of support. Based on the real-time trading report published by Stock Traders Daily, TXN is a sell/short at resistance, with risk controls in place if resistance breaks higher.
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.