(By Rich Beiglmeier) Three companies report earnings next week with iStock iEstimates that are higher than Wall Street's consensus per share forecasts. The trio has a history of moving in favor of shareholders in the days surrounding earnings.
Obviously, there is no magic wand we can wave to make stocks go higher, but we know for sure that quarterly profit checkups will either make money multiply or disappear.
The reaction is likely to be exaggerated when only 29 companies with estimates are on the docket. Beat or miss earnings handsomely and the crowd will rush in or out of the stock.
Discover Financial Services
) is expected to earn 96 cents for its 2nd quarter earnings when they announce before the market open on Tuesday, June 19, 2012. The iEstimate is $1.04 – an eight cent upside surprise.
DFS has topped Wall Street's views for eight consecutive quarters, and five of the eight announcements have seen shareholders rewarded with gains. Last quarter, the credit card company bettered expectations by 28% and the stock gained 5.6%.
Discover is stuck under its 50-day moving average; however, its shorter-term averages are starting to turn in a positive direction, which is odd considering the stock is in a downtrend. If the earnings announcement is strong enough to pierce the upper trend line connecting the last four pivot tops ($33), then the stock will have upside to the mid $34s. A close above $35 could send the stock off to the races as it will be a new 52-week high. A miss and Discover Financial is likely to test $30.
According to our model, Bed Bath & Beyond Inc.'s
) profits are likely to go beyond the Street's view of 84 cents. After the market closes on Wednesday, June 20, 2012, BBBY will announce results closer to 87 cents according to the iEstimate.
In the past four years, the home comfort retailer has never disappointed. In 14 of the 16 quarterly announcements, Bed Bath & Beyond has delivered positive surprises with two on target quarters.
Two of the last three quarters, BBBY shares have tailed off after the news, but nine of the last 13 profit pronouncements the stock price turned green.
Since April, the NASDAQ 100 member has been consolidating and tracing along its slowly rising 50-day average. The price has been flirting with but has not closed under the key trend line since the start of May. iStock also see a triangle pattern and perhaps a diamond pattern, both are reversal patterns depending on which way the stock breaks.
Earnings are likely to be the catalyst to drive the price out of either pointy shape. Our iEstimate and BBBY's history suggest the odds favor upside over downside; however, iStock would trade Bed Bath & Beyond's earnings cautiously, perhaps with a small options position. American Software, Inc.
) has a perfect track record of nice gains in the day's surrounding bullish earnings surprises. Admittedly, however, earning more than anticipated has been a rare feat for the software company.
AMSWA delivered the goods only five times in the last 16 attempts, with four of the five came in the past year. Can American Software make it five in a row on Thursday, June 21, 2012? (Scheduled but unconfirmed)
The iEstimate says yes. Wall Street has penciled in 12 cents according to the two analysts following the stock. iStock believes AMSWA will report 13 cents or more, for a small surprise.
In the fistful of plus earnings reports, American Software has gained 8.7%, 13.5%, 3.7%, 3.5% and 14.5%, from the most recent backwards.
AMSWA's share price had been trending down, but may have u-turned and started a new uptrend. Additionally, its 12 and 26-day averages are on the verge of bullishly crossing over the 50-day, normally a sign of higher prices to come.
If next Thursday's news is over the top and the stock can close above $8.80, the stock could find the mid $9s. If they miss, $8.20 shows solid support and about as low as iStock would be willing to go with American Software.