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Saturday, April 25, 2009

Earnings Preview for the Week of April 27, 2009 Jump on Board!

The major influences on the market for the coming week will be earnings once again with 4 Dow components reporting. VZ kicks the week off with first quarter results, so depending on how these results come in should set the tone of the market for the week- I am confident they'll meet or beat estimates, this is because estimates have been revised down so low, yet VZ has had very good previous quarters, or a very strong earnings momentum. However if they upset and miss relatively badly we could see all a broad sell off, as VZ is a Dow component. Many of the earnings names below you may not be familiar with, however they are companies frequently blogged about on OptionMaestro.com. I will also be placing either a (+) or (-) next to each name, simply guessing how I think each company will report. The scale is as follows:

++ Beat well and have a nice gain
+ Beat expectations have a gain within 5% of overall market performance
Neutral (no symbol) Meet expectations have no major change in price
-Miss expectations have a loss within 5% of overall market performance
-- Miss badly and have a large sell off

Keep in mind some of the companies reporting this week are ideal candidates to replace General Motors if GM happens to file chapter 11, they will certainly be taken out of the DOW (they may possibly get replaced, even if they don't file chapter 11).

Earnings lineup for the week of April 27, 2009:
Monday:
Atronics (--), Corning Inc. (+), Church & Dwight, Rock Tenn (++), Valero (-), Verizon (+)
Tuesday: Buffalo Wild Wings (++), E-trade (+), Pfizer (+), Sociedad Quimica y Minera de Chile, Sun Microsystem (no major changes on any report due to the fact they are being acquired)
Wednesday:
First Solar (+), Reynolds, Visa (++), Wyeth (no major changes on any report due to the fact they are being acquired by Pfizer)
Thursday:
Dow Chemical, Exxon Mobil (-), Kellogg (+), Marathon Oil (-), Procter & Gamble
Friday: Chevron (-), MasterCard (++)

I have made assumptions based on similar companies in each sector. Right now I am bullish on crude oil, however I was very bearish on crude in Q1, and we are looking at results from Q1, which is why I believe it will be reflected in the earnings. Small cap stocks like Buffalo Wild Wings and Astronics are always fun to watch report, as they seem to either pop or drop by 50%. I will be buying a straddle on Buffalo Wild Wings as it has worked very well for me and made me some money in the previous quarters. Visa is also another one I expect to have blowout numbers, simply because people are charging more- not necessarily a good thing but good for Visa. If they have a very good report like last quarter and can get through 6 month resistance of around 62, nothing will keep Visa back from crossing the next resistance point at around 70.

Keep in mind also that if these companies miss earnings it's not the end of the world. They can also do well depending on what kind of guidance they give (I look at future guidance more than past earnings as a buy signal). Take CAT for example; they missed earnings and lost money for the first time in over 16 years and they have been on a tear. They were even upgraded the next day by JPM (however their credit was downgraded the same day- I will be studying their Credit Default Swap chart in the weeks to come, and make a decision what I want to do with my position in CAT).


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