Which Stocks Look Ready to Pop and Drop with Earnings This Week?

the BullMarket.com Staff
Indie Research

Stocks tend to be most volatile around earnings season, when a good or bad report can make or break it. However, a good or even great earnings report doesn't necessarily translate into a huge pop for a stock.

During earnings season, BullMarket.com publishes a comprehensive 25- to 40-page Earnings Preview report for the week ahead each Friday.

In its latest earnings preview, BullMarket.com looks at several popular stocks, including Zillow (Nasdaq:Z), Nuance (NUAN), Monster Beverage (MNST), Groupon (GRPN), Green Mountain Coffee Roasters (GMCR), Priceline.com (PCLN), Linn Energy (LINE), Tesla Motors (TSLA), and First Solar (FSLR).

Here is just a tiny sample of what BullMarket.com wrote about Green Mountain:

Green Mountain has beaten analyst EPS estimates six of the past eight quarters, missing the consensus once and meeting it once. Over that period, the stock has risen the next session five of eight quarters. Seasonally, the stock has risen each of the last four years.

Last quarter, the company posted a profit of $132.4 million, or 87 cents a share, up 42% from $93.0 million, or 58 cents a share, a year ago, for its fiscal Q2 results. Adjusted EPS rose 45% to 93 cents from 64 cents. .

On the top line, revenue rose 14% to $1.0 billion, basically in line with the $1.02 billion consensus. K-Cup sales jumped 21% to $794.0 million, while Keurig brewer and accessories sales fell -10% to $126.8 million and other products and royalties dropped -7% to $84.0 million.

The company said K-Cup volumes rose 26%, while Keurig brewer shipments fell -9% to 1.36 million units, of which 131,500 brewers were via licensed partners. However, retail sell-through of Keurig system brewers increased by 13%.

Drilling down, gross margins rose 590 basis points to 41.3%. The company said the increase was driven by lower green coffee costs (290 BPS), lower obsolescence expense of finished goods and raw materials (150 bps), lower labor and overhead manufacturing costs (140 bps), a favorable product mix shift (90 bps), and lower warranty expense (80 bps).

SG&A expenses as a percentage of sales ticked down to 12.4% from 12.6% a year earlier.

The company ended the quarter with cash and short-term investments of $221.2 million and debt of $282.7 million.

Looking forward, Green Mountain upped its full-year EPS guidance to a range of $3.05-$3.15 from $2.72-$2.82. It expects sales to rise 11-14%, down from prior guidance of 15-20%. ...

Outside of earnings, Green Mountain remains a battleground stock. The bears are focused on a slowing rate of sale increases and the potential impact of generic K-Cup competition, while the bulls believe GMCR's market-leading position, strong brands, and extended lead over any future competition leave it in a strong position for long-term growth.

An extended and expanded deal with Starbucks (SBUX) announced with Q1 earnings helped put a dent in the bear thesis, as many believed that partners like Starbucks would start making their own K-Cups or move their business to a cheaper generic maker. Meanwhile, the international market, as well as rumors of a possible venture into soda, are possible longer-term drivers.

Accurate forecasting was a problem for Green Mountain in the past, and it has grown more conservative while also retooling its methodology for estimating future sales. Growth rates have to slow regardless; however, as the company can't keep growing forever at the kind of rapid rates it used to report. ...

The full BullMarket.com earnings analysis includes a look at historical earnings data and EPS trends for the companies above and more; examines past investor reactions to earnings in various contexts; gives options activity analysis; reviews previous-quarter earnings; and gives an opinion on both what earnings will look like and how investors will react based on the aforementioned data points.

Just a few of the correct calls BullMarket.com made for Q2 so far were:

  • to expect a positive reaction to Facebook's (FB) results.
  • to expect a positive reaction to Michael Kors (KORS) results.
  • to expect a negative reaction to NetFlix's (NFLX) results.
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