Earnings season is a great time to watch for stocks that decline after a company reports earnings or guidance that disappoints investors. Many stocks see exaggerated drops in their share price if a company "misses" earnings expectations by even a couple of pennies. Other times the earnings meet expectations, but if the company gives guidance that looks weak, it also often results in an exaggerated sell off in the stock. The reason I look for these opportunities is because stocks that are oversold often rebound quickly, sometimes in just days and this can create quick profits for traders or solid entry points for longer term investors. With earnings season in full swing, there are stocks getting major haircuts everyday for what might be just a short term earnings miss, so opportunities abound. All of the stocks below recently reported earnings and/or guidance that caused the shares to drop substantially. These stocks could rebound in the coming days and weeks.
Cirrus Logic, Inc., (NASDAQ:CRUS) shares are trading at $14.14. Cirrus Logic is a leading maker of specialized semiconductors and is based in Texas. The shares have traded in a range between $12.39 to $25.48 in the past 52 weeks. The 50-day moving average is about $15.25 and the 200-day moving average is $17.39. Earnings estimates for CRUS are expected to be $1.24 for 2011 and $1.46 for 2012. The book value is $6.04 per share. Cirrus supplies Apple with chips and derives a substantial amount of revenue from them.
This stock has been volatile and is providing many trading opportunities. CRUS reported earnings this week and the stock dropped from about $17.50 to around $13.50. Investors seemed to be concerned about rising expenses for research and development. The stock looks like good value in the $13 range.
Western Digital Corporation (NASDAQ:WDC) shares are trading at $25.52. Western Digital is a leading data storage device maker. The 50-day moving average is about $27.99 and the 200-day moving average is about $33.54. Earnings estimates for WDC are just over $3.87 per share in 2011 and $4.27 for 2012. With the stock trading at about 7 times earnings, the shares look cheap. This company released earnings and warned that huge floods in Thailand could impact earnings. Western Digital has shut down two factories in Thailand and it could take awhile for the company to rebound. The stock dropped a couple of dollars on this news and could be interesting if it drops further. Read more on the flood issue here.
Johnson & Johnson (NYSE:JNJ) is trading at $62.60. These shares have a 52 week range of $57.50 and $68.05. The 50-day moving average is $63.76 and the 200-day moving average is $62.62. Estimates for JNJ are for a profit of $4.96 per share in 2011, and profits of $5.26 per share in 2012. Book value is stated at $22.67. JNJ has had a number of issues with some of their products, which has caused significant concern for investors in recent months. JNJ pays a solid dividend of $2.28 per share which is equivalent to a yield of 3.5%. JNJ reported earnings this week and the stock dropped a couple of dollars due to concerns about generic competition taking some market share from some JNJ brands.
Comerica Inc. (NYSE:CMA) shares are trading at $23.16. Comerica is a major U.S. bank. The 50-day moving average is $23.91 and the 200-day moving average is $33.05. The shares have traded in a range between $21.48 to $43.53 in the past 52 weeks. Earnings estimates for CMA are $2.15 per share in 2011, and $2.37 for 2012. CMA pays a dividend of 40 cents per share, which is equivalent to a yield of about 1.5%. This stock is trading for about 10 times earnings and well below book value which is stated at $34.15. CMA shares dropped from about $26.50, a couple days ago, when the company reported quarterly earnings that disappointed many investors. The stock has started to rebound, but I would wait for dips back to about $22 or less.
Ingersoll-Rand PLC (NYSE:IR) shares are trading at $27.53. Ingersoll-Rand is a leading maker of refrigeration, heating, air conditioning and other products. The shares have traded in a range between $25.86 to $52.33 in the past 52 weeks. The 50-day moving average is $30.80 and the 200-day moving average is $41.98. Earnings estimates for Ingersoll are $2.74 per share in 2011 and about $3.28 for 2012. Since the shares are currently trading below the 50 and 200-day moving averages, I would wait for drops to at least around $26 before accumulating. Ingersoll reported earnings this week which disappointed investors. That led to a drop of about 9% for the stock. The company reported a drop in profits and special charges for this quarter, read more on that here.
Wynn Resorts (NASDAQ:WYNN) is trading at $123.67. Wynn is a leading operator of casinos and resorts. These shares have a 52 week range of $98.55 and $172.58. The 50-day moving average is $136.11 and the 200-day moving average is $140.03, so the shares are trading well below these key support levels. Book value is stated at $20.23 per share. Earnings estimates indicate a profit of $5.53 per share for 2011 and $6.38 for 2012. WYNN pays a dividend of $2 per share which is equivalent to a 1.5% yield. WYNN reported disappointing earnings this week and that led to a lower stock price. Some investors are also concerned that a slower economy could impact future earnings.
Lam Research Corporation (NASDAQ:LRCX) is trading at $40.11. Lam is a maker of semiconductor equipment and is based in California. The shares have traded in a range between $34.92 to $59.10 in the past 52 weeks. The 50-day moving average is $38.83 and the 200-day moving average is $46.14. Earnings estimates for LRCX are at $2.55 per share in 2011, and $4.03 for 2012. The book value is about $19.99. This week Lam reported earnings and net income fell about 63%, so the stock dropped to about $38, before rebounding somewhat. I think the stock is likely to test the $38 level again soon and I would only consider buying on dips to that level or below.
The data is sourced from Yahoo Finance and Stockcharts.com. The information and data is believed to be accurate, but no guarantees or representations are made. Rougemont is not a registered investment advisor and does not provide specific investment advice. This information is solely educational in nature and not intended to serve as the basis for any investment decision.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.