The good times keep on going for now.
When we look at the companies that have reported earnings this time around, 81% of them have beat analyst expectations. This is pretty darn close to the record high of 84% set in the previous two quarters.
But, there is one theme that stands out this quarter — the market isn’t impressed by the results.
Whether a company beats analyst expectations or misses them wildly, investors are shrugging off the news. It’s taking a lot more to move stocks this time around than the previous two quarters, and who can blame them.
Stocks have been running hot since the COVID-19 crash a year ago, and now investors want to know these companies are on the right track.
This quarter is coming in better than expected, but the concerns are about what happens now.
I have five companies to break down for you in today’s edition of Earnings Edge.
We’ll cover what you can expect from Agilent Technologies Inc., Synopsys Inc., Marathon Petroleum Corp., Newmont Corp. and Marriott International Inc.
Full disclosure: Earnings are a gambling event for the market. It’s fun to watch and great when it benefits your long-term holdings, but a single day price move is just like rolling the dice — you will win some, but it’s all luck.
A more profitable way to trade earnings, and one that still finds the big moves in a short period of time, is jumping in after the announcement.
I’ve spent years perfecting a strategy that takes advantage of the earnings drift, and later this month, I’m going to reveal all the details. To make sure you don’t miss out, put your name on our list to be one of the first to see what I am talking about. Click here to sign up.
Now let’s dive into this week’s Earnings Edge…
5 Earnings Reports to Watch This Week
Stock No. 1: Agilent Technologies Inc. (NYSE: A)
Earnings Announcement Date: Tuesday, February 16, after the close.
Expectations: Earnings at $0.90 per share. Revenue at $1.44 billion.
Average Analyst Rating: Outperform.
Agilent, a life science and diagnostics company, is first up on our list. It will report earnings after the bell today, and you’ve got to trust me: Don’t fight the trend with this one.
The Hewlett-Packard spinoff from the late 90s has a broad range of opportunities for growth. Its two largest segments make up custom chemistries to liquid and gas systems. But its fastest-growing segment is the diagnostics and genomics group — DNA analysis.
This company has a lot to look out for, making it even harder to gauge around earnings season.
So, my answer, don’t fight the trend.
Agilent Is Trending Higher and Higher
Shares have been riding a strong uptrend for months now, and there’s no sign of it letting up.
We have our key levels to watch going into earnings but don’t expect the stock to breakout on the big announcement. The options chain is pricing in a 3% move this week. That’s not very much considering its earnings week.
Stock No. 2: Synopsys Inc. (Nasdaq: SNPS)
Earnings Announcement Date: Wednesday, February 17, after the close.
Expectations: Earnings at $1.46 per share. Revenue at $953 million.
Average Analyst Rating: Outperform.
You can think of Synopsys as the engine powering the smart technology revolution without all the attention.
Don’t get me wrong — it’s a highly covered stock on Wall Street. But it doesn’t get the attention of the major players in the tech industry. It stays behind the scenes, automating the automation in our everyday lives. And it’s quietly seen its stock jump 150% from the lows last year. Take a look at this uptrend:
Synopsys May Breakout Higher
A rising wedge pattern like this doesn’t have to break any time soon.
So far in this earnings season, companies beating expectations are not being rewarded as much as usual. But we still see plenty of companies, with good or bad earnings reports, breakout to the upside of these wedge patterns.
Synopsys has a chance to put its name on the list of upward breakouts.
The options market expects just a 2% move in the stock this week. Shares were up as much as 5% last week, without an earnings announcement.
It’s safe to say this one is going to be on the move this week, and earnings on Wednesday will set the tone.
Stock No. 3: Marathon Petroleum Corp. (NYSE: MRO)
Earnings Announcement Date: Wednesday, February 17, after the close.
Expectations: Earnings at a $0.20 loss per share. Revenue at $846 million.
Average Analyst Rating: Outperform.
With a stock like Marathon Petroleum Corporation, it’s no secret that the share price movement is largely tied to the price of oil. It’s literally in the name of the company.
And the stock market is not the only thing that rebounded from the pandemic. Oil prices are up around 250% from the lows last year.
That’s one heck of a run.
But an oil stock like MRO has only benefited from some of the rally. Shares are still 20% below its pre-pandemic peak and 80% below its all-time high.
And now shares are trending higher in a nice rising price channel…
Can Marathon Get Back to Pre-pandemic Levels?
This is another one I’m afraid to say won’t see the stock breakout on earnings, up or down. It’s just not likely.
The options market is only pricing in a sub-3% move, no exciting fireworks even as oil prices soar.
Either the market is misjudging the news around earnings, or oil stocks are simply tracking oil price and not the fundamentals of the company. We’ll know more tomorrow.
Stock No. 4: Newmont Corp. (NYSE: NEM)
Earnings Announcement Date: Thursday, February 18, before the open.
Expectations: Earnings at $0.94 per share. Revenue at $3.45 billion.
Average Analyst Rating: Outperform.
Another commodity stock on our list, this time dealing with precious metals, is Newmont Corp.
I want to get right to its price chart because it’s not common to see these nowadays. Most stocks are breaking out in nice uptrends. But here we have Newmont, a mining operation, struggling to breakout of a simple wedge pattern, where it is making higher lows but lower highs at the same time.
Newmont Is Trending Toward a Break Higher
Now, a wedge pattern after a price spike like we saw last year tends to be bullish.
Shares of Newmont are grinding along the bottom support line in green, which could be setting up for a nice rally on earnings and for months ahead.
Of course, any expectation around earnings is a pure gamble. But if you were to roll the dice on this one, it’d have to be to the upside.
Options are only expecting a 2% move when earnings are reported, leaving room for even a little surprise to boost options value.
Stock No. 5: Marriott International Inc. (Nasdaq: MAR)
Earnings Announcement Date: Thursday, February 18, before the open.
Expectations: Earnings at $0.08 per share. Revenue at $2.4 billion.
Average Analyst Rating: Outperform
With Marriott International Inc., the hotel giant, we have another classic wedge pattern.
Hotels continue to struggle with tourism down and restricted travel. With a vaccine here, though, consumers will have more confidence to travel again. That means hotels will have a tailwind behind them throughout 2021 — one I wouldn’t bet against.
So, I’m looking for a breakout to the upside of this wedge pattern; we just may not get it this early in the year.
The issue with the wedge for Marriott is that it hasn’t been trading within these key levels very long, just three months. Newmont’s wedge pattern lasted a year and is still going.
It doesn’t mean I expect this one to last a year, but the longer the formation, the more inevitable a breakout becomes.
Marriott’s last earnings report triggered this wedge pattern formation with an 18% jump in the stock.
Marriott Is Setting Up for Something Big
Even a small 3% jump (what the options market is looking for) would cause the stock to of the wedge pattern this week.
The chart is showing us that the risk is to the downside, with prices trading just below the resistance. If we wanted to play the breakout, it’s best to wait until it occurs, then jump in and follow the stock higher.
Earnings could swing it either way, so it’s nothing more than gambling.
Just don’t bet on this one going lower in 2021.
Chad Shoop is a Chartered Market Technician and options expert for Banyan Hill Publishing. He is the editor of three leading newsletters: Quick Hit Profits, Automatic Profits Alert and Pure Income. His content is frequently published on Investopedia and Seeking Alpha. Check out his YouTube Channel to see his latest market insights.
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