Brocade Holds Prospects For Shorts Following Earnings Reports, Longs Struggle

| About: Brocade Communications (BRCD)

Brocade (NASDAQ:BRCD) is due with Q2 results in the extended-hours session tonight. The Thomson Reuters mean analyst estimate is for earnings of $0.12 per share on $541 million in revenue.

BRCD favors more aggressive next-day same-direction trade than a reversal pattern over the last nine years. The stock has added to its extended-hours performance in next-day regular session trade in 21 of its last 36 earnings events and narrowed or reversed in the other 15. In the near-term, the stock favors widening its share move between the sessions, doing so in eight of the last 10 quarters.

Looking deeper into the performance data, BRCD favors the shorts side. It has recorded an earnings-driven after-hours decline in 17 of the quarters tracked in our database, widening that downside move in next-day action in 10 of those events, or 59% of the time. The stock is about evenly mixed on the long side, splitting its trade between either widening or narrowing its earnings-driven gains in follow-on regular session play.

  • On Feb. 21, 2012, BRCD gained 5.4% in night trade on the back of a Q1 earnings beat. It narrowed its gains the next day, closing the Feb. 22 regular session up 2.6%.
  • On Nov. 21, 2011, BRCD firmed 5.5% in evening trade after posting better-than-expected Q4 results. The stock surged higher the following day, ending the Nov. 22 regular session up 13.1%.
  • On Aug. 18, 2011, BRCD declined 3.3% in after-hours action after meeting Q3 revenue expectations and beating on earnings. The stock saw its declines evaporate the next day, ending the Aug. 19 regular session up 3%.
  • On May 19, 2011, BRCD edged up 0.6% in after-hours trade after beating Q2 earnings estimates. The stock surged higher the following day, ending the May 20 regular session up 6.5%.
  • On Feb. 17, 2011, BRCD advanced 4.3% in evening trade after beating Q1 expectations. The stock added to its upside the following day, closing the Feb. 18 regular session up 5.9%.
  • On Nov. 22, 2010, BRCD slumped 4% in after-hours trade despite beating Q4 expectations. The stock tumbled deeper in the red the next day, closing the Nov. 23 regular session down 10%.
  • On Aug. 18, 2010, BRCD tumbled 6% in evening trade after missing Q3 revenue expectations. The stock added modestly to its downside the next day, closing the Aug. 19 regular session off 7.6%.
  • On May 20, 2010, BRCD slid 8% in after-hours activity on lower-than-expected Q2 sales. Shares extended those losses the following day, ending the regular session down 8.7%.
  • On Feb. 22, 2010, the stock fell 11.9% after an earnings beat but a revenue miss for Q4. Shares dropped 23% the next day.
  • On Nov. 24, 2009, BRCD shed 2.6% in pre-market trade after posting results just ahead of expectations. The stock continued heading south in that day's regular session, ending down 8.9%.
  • On Aug. 20, 2009, the stock fell 5.3% after missing with revenue. Shares dropped 4.8% the next day.
  • In the May 21, 2009 pre-market session, BRCD advanced 7.5% after a Q2 beat. Shares were up 14.4% in the regular session.
  • On Feb. 19, 2009, the stock fell 1.2% after a revenue miss but a beat with its latest earnings. The loss swelled to 9.1% the next day.
  • On Nov. 20, 2008, the stock gained 2.5% after beating with Q4 results. Shares reversed to close down 0.3% the next day.
  • On Aug. 13, 2008, BRCD advanced 3% in pre-market trade after beating Q3 expectations. It reversed that gain just slightly in the following regular session, ending the day up 2.9% by the Aug. 13 closing bell.
  • On May 14, 2008, the stock fell 2.7% during evening trading even after BRCD beat with Q2 EPS by a penny and topped with revenue. The loss was trimmed to 0.6% by the closing bell the next day.
  • On Feb. 14, 2008, the stock was up 1.1% during evening trading after beating by a penny with EPS but missing with revenue. The gain swelled to 13% the next day.
  • On Nov. 29, 2007, the stock fell 1.9% during the evening hours after BRCD reported ahead of the Street with EPS but shy with sales. The loss stretched to 5.8% the next day.
  • On Aug. 23, 2007, BRCD eased 1.5% in after hours when the company met Q3 sales estimates and topped on EPS. However, it also provided Q4 guidance that was mostly below Street views. Shares, though, recovered the next day to end the regular session up 4.3%.
  • On May 31, 2007, BRCD slipped 1.2% in night trade after beating Q2 estimates but guiding for Q3 sales to miss. Shares tumbled 8.1% in the next day session.
  • On Feb. 26, 2007, the stock was up 6.1% in the evening session after BRCD reported above the Street view with its Q4 results. The gain was trimmed to 5% the next day.
  • On Nov. 21, 2006, shares gained 4.2% in the evening session after the company reported above the Street with earnings and guided in line to higher. The stock jumped 10.8% the next day.
  • On Aug. 17, 2006, BRCD rose 5.3% in night trade after topping Q3 estimates and guiding for Q4 to be above Street views. Shares, though, eased off those gains and closed the next day session up 3.5%.
  • On May 18, 2006, BRCD jumped 6% in after hours when the company beat Q2 EPS estimates and guided for Q3 results to be above Street estimates. However, the shares couldn't hold all their gains and ended up 3.2% in the following day's regular session.
  • On February 16, 2006, BRCD gained 5.6% in after-hours when the company topped Q1 estimates and offered Q2 and FY06 sales guidance above Street estimates. The shares strengthened a bit further the next day, ending the regular session up 6%.
  • On Dec. 6, 2005, BRCD advanced 2% in pre-market trade after the company reported better-than-expected Q4 results. The upside failed to hold through the regular session as BRCD ended the day down 7.5%.
  • On Aug. 18, 2005, BRCD declined 2.8% in evening trade after beating on revenue and meeting on EPS. It cut back its downside slightly the next day, closing the Aug. 19 regular session off 2%.
  • On May 19, 2005 BRCD slipped 3.3% in night trade after the company matched expectations but guided below Street estimates. It was hit for a deeper decline on May 20, losing 11.3% by the closing bell.
  • On Feb. 16, 2005 BRCD advanced 3.2% after the company beat expectations and set its outlook in line to slightly higher than the current Street views. The stock firmed to a 4.4% rise by the close of the Feb. 17 regular session.
  • BRCD edged down 0.8% the night of Nov. 22, 2004 after the company reported better-than-expected Q4 results and mostly in-line guidance for Q1. The stock closed out the Nov. 23 regular session down a more aggressive 3.9%.
  • Prior to the Nov. 22-23 timeframe, BRCD had developed a clear narrowing pattern following its previous earnings events, crossing narrower next-day closing levels in its last three earnings reports.
  • On Aug 18, 2004 BRCD slid 2.8% in after-hours trade after reporting in-line results and a revenue outlook that could either meet or fall below current expectations. It closed the Aug. 19 regular session down 2%.

In its previous two earnings reports BRCD also narrowed its declines and gains, in fact reversing an after-hours decline of 1.3% the night of May 19 to end the next day up 6.8%. Prior to those earnings reports it had posted wider next-day moves in its last three regular sessions, post-earnings.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.