By Neal Rau
Earnings season is upon us again, and as companies are 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 28 2013.
Advent Software, Inc. (ADVS) is scheduled to report $0.28 per share for its third quarter when the company releases earnings on Monday October 28 after the bell, which would be $0.02 better than the same quarter a year ago. The company reported Q2 earnings of $0.37 per share, $0.07 better than the consensus estimate of $0.30; revenues rose 7.1% YOY to $96.1 million versus the $94.6 million consensus. Advent also issued slight downside guidance for Q3, estimating Q3 revs of $93-95 million vs. $95.1 previously expected. The stock is up 56% YTD and 15% over the last 3 months. Should investors buy shares ahead of earnings?
Shares of ADVS are getting close to a test of long-term resistance. Even if Advent Software is able to beat estimates on Monday, it does not mean the stock will continue to rise, as stock price matters. The stock is trading near the yearly highs, and close to testing long-term resistance. If the stock tests resistance, and remains below resistance, as defined in our real time trading report, Stock Traders Daily expects lower levels and a test of support. That would make ADVS a sell/short at resistance, with risk controls in place if resistance breaks higher.
Cognex Corporation (CGNX) is expected to report $0.21 per share, which is in line with the same quarter last year, when the company reports Q3 numbers on Monday October 28 after the bell. The company said after releasing Q2 numbers that for the third quarter of 2013, it expected revenue to be between $88 million and $91 million. According to estimates, analysts were expecting the company to report revenue of $88 million for the third quarter of 2013. The stock is up 61% YTD, should investors be buying, selling or holding CGNX ahead of earnings?
Shares of CGNX have been trading in a tight range over the past three months, and currently the stock is sitting in the middle of a channel according to our real time trading report , so it does not look attractive as a buy ahead of earnings. 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. When stocks are in the middle of a channel like this one they become less attractive, from a risk control perspective, especially ahead of an earnings report.
Masco Corporation (MAS) is expected to earn $0.25 per share when the company reports its Q3 numbers on Monday October 28 after the bell, which would be a 92% increase from the same quarter a year ago. Shares of Masco offer a dividend yield of 1.46% based on its current price of $20.48 and the company has annualized dividend payout of 30 cents per share. The stock is up 23% YTD, but it has pulled back over 8% from the yearly highs in mid-September. Is MAS a buy ahead of earnings?
Investors need to be aware of price, and based on the Stock Traders Daily real-time trading report, the stock has been drifting 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 ahead of earnings.
Olin Corporation (OLN) is scheduled to report earnings of $0.66 per for its third quarter versus $0.35 per share it posted in the same quarter a year ago. In Q2 the company reported earnings of $0.54 per share, $0.02 better than the consensus estimate of $0.52; revenues rose 28.2% YOY to $652.2 million versus the $659.69 million consensus. The stock is down about 3% from when the company reported Q2 numbers, and down over 12% from the 52-week highs in April. Is the recent dip a buying opportunity ahead of earnings?
Investors need to be aware of price, and based on the Stock Traders Daily real-time trading report for OLN, 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 caution investors not to chase the stock, especially ahead of earnings.
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.