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The Earnings Docket: 4 Stocks to Watch This Week

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Whether you fit the mold of a chart-watching technical trader, or you'd rather delve into a company's financial statements, all investors are wise to monitor earnings reports. While keeping a constant eye on the quarterly releases of all 46,000+ stocks traded throughout the world is a job reserved for Chuck Norris, it is crucial to at least follow the earnings calendar of the stocks held in your portfolio. In fact, it is a necessity, because any surprises – above or below Wall Street expectations – usually have an effect on a company's stock price.

For the more daring investors, it is also possible to make a speculative play before earnings are released, though it's always sensible to perform a bit of underlying analysis before a long or short position is initiated. Here are some stocks to watch for the week of May 14 to the 18.

Monday: To start the week, Groupon (NASDAQ: GRPN), which is trading near its 52-week low of around $10 a share, reports its Q1 results. The stock is currently in a free fall, losing more than 50 percent of its value over the past three months. Last time around, GRPN posted a $64.9 million loss in the fourth quarter of 2011 and a year-end EPS of -$1.03, citing weaker than expected demand, increased competition and a hefty tax bill. Interestingly, year-over-year Q4 revenues actually grew by 194 percent, but GRPN could not control it's spending. This quarter, analysts expect a loss of 4-6 cents per share.

There are a lot of unknowns here, but GRPN could exceed estimates if it can translate its top-line success to the bottom-line. On the other hand, the company's history of accounting ‘difficulties' warrants investors' caution.

Tuesday: In this article, we discussed the fact that Home Depot (NYSE: HD) has seen increased short selling activity over the past month, even though it has returned nearly 20 percent to investors' pockets since the start of 2012. These bears' efforts may be for naught, as the world's largest home improvement retailer is expected to report a Q1 earnings of 66 cents a share, almost four times greater than the previous year's release.

Last quarter, HD's bottom-line exceeded expectations by a margin of 20 percent, as the company cited improved marketing and better than expected same-store sales growth. Intriguingly, valuation indicators signal that shares of HD may be overvalued, as its current P/E of 20.5X is greater than its industry's average (19.9X), and its 10-year historical average (16.7X).

Wednesday: Abercrombie and Fitch (NYSE: ANF) is known for its appeal to the affluent teen, though older investors have been liking this stock since the end of the recession, as its returned almost 80 percent in the past three years. Over the past month, however, shares of ANF have remained relatively flat. While the bulls clamor over a revenue growth of nearly 20 percent last year, the company could not translate this to the bottom-line, as its yearly EPS fell from $1.67 to $1.43.

On the macro-level, ANF has increased its international presence in both Canada and Europe, but the company has relatively no barriers to entry, as the teen retailer space is cluttered with competitors. In the first quarter of this year, it's expected that ANF report a meager EPS of $0.02, which would be 25 cents lower than the company's Q1 earnings in 2011.

Thursday: The Mexico controversy aside, Wal-Mart (NYSE: WMT) has disappointed its shareholders in 2012, with a negative return of around a percentage point. Additionally, the company has seen its revenue and EPS growth slow since the recession, reporting 3-year average growth rates of 3.4 percent and 10.7 percent respectively, both of which are below industry averages.

Last release, WMT reported a less-than-expected EPS of $1.50 – a 13 percent decline from the previous year's 4th quarter – as the company's holiday discounting strategy may have been too deep. In the first quarter of 2012, analysts are expecting an EPS of $1.04. If the retailer meets these estimates, earnings would have grown by 6 percent from last year's first quarter.

There are no significant earnings releases on Friday, giving Chuck Norris – and maybe you – a three-day weekend. Check Benzinga next week to see what's on the Earnings Docket.

Follow me on Twitter at @mjakemann

Posted-In: Earnings Long Ideas News Guidance Short Ideas Movers Tech Trading Ideas

 

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