For the past several months, I have been working on a model to predict the direction a stock will move after the company reports its quarterly earnings. The underlying assumption is that the level of expectations leading up to the announcement is more important than the actual numbers that the company reports.

If expectations are unusually high going into the announcement, something in the announcement invariably seems to disappoint investors, and the stock price usually falls, regardless of how well the company does compared to analyst expectations (or even whisper numbers).

The disappointment might be based on something other than earnings - it could be revenues, margins, or guidance, or something entirely different, like an expected dividend boost that didn't come through. In any event, when expectations are through the roof, the chances of some kind of disappointment and a lower stock price are increased dramatically.

Surely, anyone who has

SalesForce.com (CRM) announces earnings after the close on Thursday, May 23, 2013. The company provides enterprise cloud computing solutions to various businesses and industries worldwide. Founded in 1999, it sports a market cap of $24 billion even though it has never showed a profit.

Not showing a profit makes it difficult to calculate a P/E ratio, forcing analysts to look at revenue as an alternative proxy to measure enterprise value. YOY revenue growth has been high, about 32%, which gives some justification for its forward P/E of 74. This compares to its competitors' forward multiples of 12 for Oracle (ORCL) and 20.5 for SAP (SAP). CRM seems pretty pricey, even if the company turns the corner to profitability.

Here are the results after the earnings announcement for the past four quarters, with the stock price change from the close on the day before the announcement until the closing price

Abercrombie & Fitch (ANF) announces earnings on Friday, May 24, 2013 before the market opens. This is a little scary for option traders because the weekly options will be in play for only one day before they expire.

ANF describes itself as a specialty retailer of casual apparel for men, women, and kids (although I could never figure out how you can specialize in all three at the same time). Market cap $4.24B and most recent closing price $54.24. Trailing P/E 19 which is slightly higher than competitors American Eagle Outfitters (AEO) and The Gap (GPS) who have a P/E of 17.

Institutional investors have sold nearly 34 million shares over the last quarter (source: Yahoo) which amounts to about 44% of the outstanding shares. While this is a disquieting statistic, the company pays a well-protected 1.5% dividend (payout ratio only 25%) which helps protect against a huge drop

Sina Corporation (SINA) will announce earnings after the close on Wednesday, May 15, 2013. SINA is sort of the Yahoo of the Chinese market, and shares many of the opportunities and challenges of its American counterpart. While its social networking platform (Weibo) has grown rapidly of late, the company has encountered difficulty in monetizing its traffic flow. A recent alliance with a major Chinese e-commerce company (Alibaba, which bought an 18% interest in Weibo for $586 million) may change the situation entirely.

Let's check how SINA has fared with its last four earnings announcements:

(click to enlarge)

SINA has a solid record of beating estimates - all four of the last four quarters - and in three of those quarters the stock moved higher after the announcement, twice moderately by a little less than 3% and once significantly, up 11.3%. But in November of last year, the stock was hammered

Deere & Company (DE), the big farm equipment dealer, announces earnings before the open on Wednesday, May 15, 2013. The company has an amazingly consistent record of falling after announcing, regardless of whether it exceeds or falls below analyst estimates. Here are the results for the past four quarters, with the stock price change from the close on the day before the announcement until the closing price on Friday (when the weekly options expire):

(click to enlarge)

Deere beat estimates twice and came up short twice, but in all four quarters, the stock traded lower after the announcement. Ironically, the quarter when it came up short by the greatest amount (8/15/12), the drop in stock price afterwards was half as great as the loss in the two quarters when it beat estimates.

If the tendency for the stock to fall after an earnings announcement continues (and there seems to be

Green Mountain Coffee Roasters (GMCR) announces earnings after the close on Wednesday, May 8, 2013. If history is any indication, the stock is likely to make a huge move, one way or the other. Over the last four quarters, the average price change after earnings was a whopping 26.1% (measured from the closing price on the day before the announcement until the closing price when the Weekly options expired on Friday).

Here is what has happened after the past four earnings announcements:

(Click to enlarge)

While GMCR has met or exceeded expectations for all four previous quarters, the market has clobbered the stock when it only met the earnings expectation (possibly fueled by claims that they had cooked the books to make those numbers). The average change over the past four quarters has been 26.1%, skewed by the huge 49.3% drop one year ago. Even discounting that quarter, the average

Every earnings reporting season seems to have a life of its own. Let's check out how it looks so far to see if we can detect any trends which might continue now that the season is in full swing.

If we assume the earliest possible date a company who reports is on a calendar year basis (which includes most companies), the earliest possible reporting date is April 1, 2013. Since that time, 15 large companies (all of whom have weekly options available and trade for over $20) have announced. Here are the results:

(click to enlarge)

*Expected earnings per analysts, source: TD Ameritrade
**Average post-earnings historical change, source: EarningsWhispers.com
Pre $ = Closing stock price on the day before earnings were announced
Post $ = Closing stock price on Friday after earnings were announced

Thirteen of the 15 companies beat analyst expectations by an average of 14.8%. Only Freeport McMoran

This is the second article covering companies who report earnings during the week starting April 22, 2013. The first article -- 3 Earnings-Related Plays For Next Week -- included the companies that report before Wednesday, April 24th, and today the rest of the companies are covered.

For several months I have been studying ways to predict stock price action after an earnings announcement using four measures:

Whisper numbers vs. analyst expectations

1. Stock market action leading up to the announcement
2. The percentage change predicted by option prices vs. historical post-announcement changes
3. The implied volatility (IV) advantage of the Weekly options over the next-month out options (this is also a good indicator of how much the further-out options will implode in value after the announcement).

The basic premise is that if expectations are unusually high, there is a very good chance the stock will fall after the announcement, regardless of how

Looking forward to next week, there are two things I believe in. First, investor expectations prior to an earnings announcement are more important than the earnings themselves, and second, Apple (AAPL) is headed higher than its current price of $392.

For several months I have been studying ways to predict stock price action after an earnings announcement using four measures:

1. Whisper numbers vs. analyst expectations
2. Stock market action leading up to the announcement
3. The percentage change predicted by option prices vs. historical post-announcement changes
4. The implied volatility (IV) advantage of the Weekly options over the next-month out options (this is also a good indicator of how much the further-out options will implode in value after the announcement).

The basic premise is that if expectations are unusually high, there is a good chance the stock will fall after the announcement, regardless of how much the company beats analyst expectations on earnings,

That wonderful time is upon us. Four times each year we enjoy the excitement of possible huge successes as our favorite companies release their quarterly results and give us a hint at what's to come down the road. For some of us stock market junkies, it's a little like having Christmas four times a year. Every morning we tip-toe down to our computer to see what goodies have come our way since yesterday's market close.

Last week I wrote an article about the first company with weekly options to announce in April, JPMorgan (JPM) (How To Play The JPMorgan Earnings Announcement). Even though the company exceeded expectations by a wide margin, the stock fell slightly after the announcement and the option positions I proposed racked up nice double-digit gains after commissions. Once again, expectations played a more important role in what the stock price did than

This coming week, the earnings season begins in earnest with JPMorgan (JPM) announcing before the open on Friday, April 12th. The company has an enviable record of consistently beating expectations - 11 out of the last 12 quarters, and over the past year, they overachieved by an average of 27%.

While this record is exceptional, the interesting thing to me is how the market has reacted to each announcement. Over the past four announcements, the stock has actually fallen half the time. The only exception was in July when JPMorgan exceeded by a whopping 59% and the stock moved $2.03 higher (this was an unusual quarter because expectations were dramatically reduced due to the London whale disclosure in May). For the last two quarters, the stock has fluctuated by less than $.50 (once up, once down) on the day following the announcement, in spite of the company exceeding expectations by

First Solar (FSLR) crossed my radar screen this week because it announces earnings after the bell on Tuesday February 26th, and the announcement is slated to be a blockbuster one as the company moves from a loss situation to a projected $1.75 per share of earnings. Option prices have skyrocketed in anticipation of unprecedented uncertainty - implied volatility (IV) of the weekly options that expire three days later has escalated to 106 vs. a "normal" non-earnings IV of about 40.

There is a lot to like about this company. Its market cap ($2.94 billion) is almost identical to its trailing revenues ($2.95 billion) and sales have been growing substantially for several years. While it has been losing money for a couple of years, things are about to turn around, and the analysts project that the forward p/e for the 2013 calendar at the bargain-basement level of 8.33.

It is

Tesla Motors (TSLA) crossed my radar screen this week because of the unusual debate going on between the New York Times reporter who disparaged Tesla's Model S (Motor Trend magazine's "Car of the Year" for 2013) and the Tesla's CEO Elon Musk, and because the company announces earnings on Wednesday after the close.

Tesla has sold about 2400 Roadster 2 electric cars in 31 countries from 2008 to 2012 (list price $107,000), presumably mostly in Europe where gasoline costs about double its U.S. cost. In late 2012, it commenced production of its Model S with a base price of $60,000. Its goal is to ramp up to a 20,000 annual production level, or about 16 times as many cars as its average annual production so far. That seems to be quite a big leap, but I thought I would check out what a car manufacturer might

Buffalo Wild Wings (BWLD) will announce earnings after the markets close next Tuesday, February 12th. Twice in the last year results have fallen short of expectations and the stock has tumbled more than 10% on the news. Is that scenario likely to repeat itself next week? That is the question I would like to address today.

BWLD is a fast-growing restaurant chain that features chicken wings and beer served mostly in a sports bar setting. Now that the Super Bowl has been played and the football season over until next year, sales may taper off a bit. However, except for Starbucks (SBUX), BWLD's recent growth has bested its competitors - McDonald's (MCD), Yum (YUM), Jack In The Box (JACK), Chipotle (CMG), Bloomin' Brands (BLMN) and Panera (PNRA).

BWLD is tiny compared to MCD, with only 900 restaurants compared to MCD's 14,000. Management seems to be more creative

Green Mountain Coffee Roasters (GMCR) announced earnings last night, which beat expectations by a fair amount -- and yet the stock fell by about 9% in early after-hours trading. This caused great consternation and questions from many followers of the company's already roller-coaster recent life. What the heck is going on here? Even Jim Cramer can't understand it.

Several Seeking Alpha articles have discussed the latest earnings announcement and conference call implications. I would like to comment on some aspects of the situation, which were not covered in these articles (or were insufficiently discussed, in my opinion).

Here is the essential paragraph from the "Green Mountain Coffee Roasters' CEO Discusses F1Q 2013 Results - Earnings Call Transcript" -- "On a non-GAAP basis, a measure that we feel best reflects the underlying performance and health of the business, we delivered earnings per share of $0.76, an increase of 27%

Three months ago, Green Mountain Coffee Roasters (GMCR) earned 64 cents a share, handily beating the Street's estimate of 48 cents a share. The stock gained 27% the next day. But about one year ago today, the company missed expectations, and the stock fell a whopping 30% on the following day.

The company reports earnings after the close on Wednesday, February 6th. Which of the above two scenarios is likely to repeat? The market is preparing for the fireworks. Implied volatility of the weekly options, which expire two days after the announcement, has soared to 164, about five times what it is in "normal" times. The options are predicting about an $8 price change on a $46 stock.

This is a truly exciting time for people who follow GMCR. Three months ago, I wrote a Seeking Alpha article in advance of the earnings announcement -- "A Dynamite Options Strategy

Baidu (BIDU) currently owns 73% of the China search engine market share which compares favorably to Google's (GOOG) 67% of the U.S. market share. While some analysts discount BIDU's future prospects because it is not much of a factor outside of China, there are about four times as many people in that country compared to the good old U.S. of A., and many of them have jobs (presumably making stuff for Walmart), and growing numbers of them are embracing the Internet.

On Monday after the close, BIDU will announce earnings, and this seems like the perfect time to consider the prospects for this company.

BIDU is a reasonable way to play the Chinese market (except that it is a Chinese company that doesn't have the SEC looking over their shoulder). U.S.-based companies with a large and growing interest in the Chinese market include Yum! Brands (YUM) where the

Yum! Brands (YUM), with more than 14,000 KFCs, 13,000 Pizza Huts and 6,000 Taco Bells sounds like a fast-food investment right along with McDonald's (MCD) 34,000 restaurants, but in the last few years, YUM has become a way to invest in China without plunking money down on a Chinese company you don't know much about, and which might not have the same rigorous reporting requirements that U.S. companies are subject to.

In 2001, YUM got 44% of its sales and 50% of operating income from China. Five-year sales growth has been 12% in China, and only 2% in the U.S.

When China sneezes, YUM gets pneumonia. On November 29, 2012 the company announced that same-store China sales had fallen 4% and the market knocked the stock down a whopping 10%. And then, on January 7, 2013, YUM stock dropped another 4.3% when the company revised the 4% decline in China

While the Herbalife (HLF) controversy seems to have been put on a back burner, it is still simmering away. Bill Ackman, joined by legions of anonymous followers who respect his earlier calls on companies which imploded such as Green Mountain Coffee Roasters (GMCR), and have sold HLF short are up against another hedge fund titan Dan Loeb who has purchased 8 million shares or so, joined by others like Carl Ichan who is rumored to be a buyer as well.

Ackman believes the stock is headed for zero and Loeb believes it is headed 40 - 70% higher. Who is likely to be more right, that is the question.

This is the last article I will write on the subject (as I have sold my option positions which benefited by selling short-term puts and calls when implied volatilities where about triple what they are now). When the boiling pot became

Going into Thursday's earnings announcement (after the close), Starbucks (SBUX) has been doing quite well lately, consistently growing sales at about 11% (with 14% projected for next year). Earnings have shown similar results. The total number of stores increased by 415 (2.4%) last quarter, a larger number than any of the past eight quarters.

The stock has shot up by about 10% since November, and analysts seem to like the company, with 12 rating it a "strong buy," 11 rating it a "buy" and 7 a "hold" according to Yahoo! Finance.

The company has a good record of increasing dividends, doubling quarterly payments from $.10 in March 2010 to $.21 today. They have raised the dividend every year since initiating them in the July quarter, so we should not expect to hear about another increase this week. The payout ratio is about 38%, a little on the high side, at