The quarterly earnings season is coming to an end soon.
But that’s not stopping us from using our proven screeners to identify potentially “bullish” and “bearish” earnings coming next week.
Before I dive into next week’s earnings, I want to analyze an earnings call I made last week on a popular retail chain.
Let’s dive right in…
Dick’s (DKS) Hammers Earnings Estimates
Last week, I highlighted Dick’s Sporting Goods Inc. (DKS) as one of the stocks under our “bullish” earnings to watch.
The sporting goods retailer was coming out of the holiday season, and I expected it to beat earnings-per-share (EPS) expectations.
It did that… and more.
The company reported EPS of $4.05 on $6.23 billion in revenue.
Consensus estimated the company would report earnings of $2.99 per share.
Dick’s earnings were buoyed by healthy sales growth and strong holiday season demand. Average spending per purchase was up, as customer interest in sporting goods remained resilient.
In addition to strong earnings and sales, Dick’s noted a 46% year-over-year jump in gross profit.
The biggest change moving forward is that the company’s earnings and revenue will include Foot Locker’s results, which Dick’s acquired.
The strong earnings report led to a pop of more than 2% in the share price yesterday.
Now, let’s examine potentially “bullish” earnings for next week…
“Bullish” Earnings to Watch
These stocks are expected to beat their previous quarter’s EPS. And if those expectations are met or exceeded, they could potentially trade higher.
For this screen, stocks must meet four criteria:
- 10 or more analysts cover the stock.
- The average analyst recommendation is a “Buy.”
- It BEAT analysts’ EPS estimates for the previous quarter.
- The average analyst estimate for the current quarter’s EPS is greater than the previous one.
Here are 10 companies that made this week’s list:
On the back of Dick’s strong earnings, I view Five Below Inc. (FIVE) and Academy Sports & Outdoors Inc. (ASO) as attractive opportunities as well.
Five Below is forecast to turn in EPS of $4, well above its previous quarter’s $0.66.
On the other hand, Academy is projected to increase its EPS by $1 to $2.05.
Much like Dick’s, both are primed to benefit from strong holiday sales… in their own unique ways.
Five Below is a discount retailer (think Dollar General). With inflation still running high, the company should report an uptick in sales as people become thriftier during the holiday shopping season.
Academy should capitalize on Dick’s increased demand for sporting goods and equipment to see its EPS rise for the quarter.
Either way, I expect both to beat estimates. Five Below has reported upward surprises in each of the last five quarters. Academy has not been as strong, but a lower estimate raise should help the company report an EPS beat.
In both cases, beating expectations should result in a move up in Adam’s Green Zone Power Ratings system.
Now, let’s look at potentially “bearish” earnings for next week…
“Bearish” Earnings to Watch
For our “bearish” earnings screen, we’re only looking for two things:
- 10 or more analysts must cover the stock.
- The average analyst estimate for the current quarter’s EPS is less than the previous quarter’s.
We want companies that are covered by a sufficiently large group of Wall Street analysts who collectively expect the company to report a quarter-over-quarter decline in earnings.
Since we are nearing the end of the earnings season, I expanded this screen to include companies not listed on the S&P 500.
Here are nine companies that passed this screen:
I hate to sound like a broken record, but this list looks awfully familiar to last week.
Once again, the majority of the list consists of biopharma companies.
Here’s what I said last week about the biopharma stocks on that list:
The main issue with stocks in the sector is that if they are relatively new, they spend money on research and development without earnings.
If they don’t have a drug on the market, they can’t make any money.
I believe that is what we are seeing with the three biopharma companies on our list here.
This week, it’s the same song, second verse.
All six biopharma stocks on this list are projected to report negative earnings, and I believe analysts are just as correct about these as they were about last week’s.
And that kind of drop in earnings is certainly going to impact their rating on Adam’s Green Zone Power Ratings system.
That’s all from me today.
Until next time…
Safe trading,
Matt Clark, CMSA®
Chief Research Analyst, Money & Markets
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