By Neal Rau
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 November 5.
CVS Caremark Corporation (CVS) is scheduled to report earnings on Tuesday November 5 before the market open. The company is expected to earn $1.02 per share, which would be a 20% increase from the same quarter a year ago. Revenue from MinuteClinic, which is a small clinic inside CVS stores, is witnessing robust growth, as the results of its second quarter showed revenue growth of 32% year over year. The company will be looking to add revenue from the MinuteClinic expansion. CVS has a long-term plan of operating 1500 clinics by the end of 2017. The stock is up 29% YTD and trading near the 52-week high. Should investors buy, sell or hold CVS ahead of earnings?
According to the real-time trading report offered by Stock Traders Daily, shares of CVS recently made a new all-time high and are now getting close to a test of resistance, and as a rule we are sellers if resistance is tested (it is not there yet). If the stock does test long-term resistance, and remains below resistance, we would expect a full oscillation to support. However, resistance also acts as our risk control, and if resistance breaks higher we would consider that a sign to exit any short positions.
DirecTV (DTV) is scheduled to report earnings on Tuesday November 5 before the market open. Analysts' estimates are for the company to earn $1.03 per share for its third quarter. Last year during the same quarter, the company earned $0.90 per share. There have been many reports that the NFL is in discussions with providers for NFL Sunday Ticket, which is currently owned by DirecTV. Chief Executive Officer Mike White said he was optimistic that the contract "will stay with us for the long haul" during a conference call last month. The stock is up 25% YTD, but shares are off 8% from the yearly highs. Should investors buy shares of DTV before earnings?
Investors need to be aware of price, and based on the Stock Traders Daily real-time trading report for DTV, 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.
Mosaic Co. (MOS) is expected to report earnings of $0.88 per share when the company reports on Tuesday November 5 before the market open, which would be a 37% increase from the same quarter a year ago. The company recently signed a definitive agreement to acquire the phosphate business of CF Industries for $1.2 billion in cash plus $200 million to fund CF Industries' asset escrow. Shares of MOS are down about 17% YTD, however the stock is up about 14% over the past three months. Is there still upside after the recent run up in share price?
Even if MOS announces much better numbers than analysts expect, it does not mean the stock will continue to rise. Price matters now, and according to the real-time trading report offered by Stock Traders Daily, shares of MOS are getting close to a test of long-term resistance. As a rule, we are sellers if resistance is tested (not quite there yet). If the stock does test long-term resistance, and remains below resistance, we would expect a full oscillation down to support. However, resistance also acts as our risk control, and if resistance breaks higher, bullish signs would surface.
OfficeMax Inc. (OMX) is expected to report $0.22 per share when the company reports its quarterly earnings on Tuesday, which would be $0.10 better than the $0.12 the company reports the same quarter a year ago. The company recently announced it is opening its doors at 8:00 p.m. local time Thanksgiving night with hot door-buster deals, and offering significant Black Friday savings at OfficeMax.com starting at 12:01 a.m. EST Thanksgiving morning. Shares of OMX have been showing strength attributed to speculation that the merger with Office Depot may go through. The stock is up 52% YTD and trading near the yearly highs. Should investors buy shares ahead of earnings?
Based on the Stock Traders Daily real-time trading report, OMX has broken above long-term resistance, which is now converted support. That is a very bullish sign, and so far, converted support is holding, as long as that remains true, the rules that govern our strategies tell us to expect higher levels. However, converted support also acts as our risk control, and if converted support breaks lower, we would stop out of that long 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.