Canada Markets closed

Previewing Earnings for Dell, NetApp, Wal-Mart, Target & Others

the Staff

Stocks tend to be most volatile around earnings season, when a good or bad report can make or break it. However, a good or even great earnings report doesn't necessarily translate into a huge pop for a stock.

During earnings season, publishes a comprehensive 25- to 40-page Earnings Preview report for the week ahead each Friday.

Over the past year, used the data it has collected to correctly predict investor reactions for approximately two-third of the stocks it's previewed.

In its latest earnings preview, looks at several popular stocks, including NetApp (NTAP), Wal-Mart (WMT), Target (TGT), Gap (GPS), Dollar Tree (DLTR), and Dell (DELL).

Here is just a tiny sample of what wrote about Dell:

Dell has surpassed analyst EPS estimates six of the past eight quarters, missing the consensus twice. During that time, the stock has risen the next day three of eight quarters. Seasonally, the stock has risen once in the past four years.

Last quarter, Dell reported fiscal second-quarter net income of $732 million, or 42 cents a share, in the fiscal second quarter, compared with $890 million, or 48 cents a share, a year earlier.

Excluding certain items, it earned 50 cents a share, beating an average forecast for 45 cents.

It reported revenue of $14.5 billion, below the $14.64 billion analysts had expected.

As part of a restructuring, Dell intends to slash more than $2 billion in costs over the next three years, primarily from the supply chain and sales group, as it tries to focus on the technology needs of corporations.

Dell forecast revenue would slide -2% to -5% sequentially to $13.8 billion to $14.2 billion. The revenue consensus at the time was $14.85 billion.

It is predicting earnings per share of at least $1.70 for fiscal 2013, compared with a previous forecast for more than $2.13. ...

Outside of earnings, Dell has been transitioning from a PC maker and OEM reseller to a more service-oriented company with deeper-owned product offerings, but it hasn't been a completely smooth transition and earlier this year the company announced it was reorganizing its sales model to address some of the challenges it has been experiencing and that it was going to focus more on "integrated solution offerings" rather than specific products.

By doing a better job of selling its own differentiated products, Dell can leverage its strong distribution channel to boost margins and then layer on service offerings. We think Dell's strategy can work, but the company is playing catch up and it is going to take time and money (for acquisitions) to get it right. Its latest acquisition was the $2.4 billion purchase of Quest Software to help bolster its IT service unit.

Meanwhile, the PC market has been very bad recently and Dell's laptop business has been battered by competition from low-end competitors while also losing out to the iPad as consumers increasingly opt for smaller and lighter mobile devices. ..

The full earnings analysis includes a look at historical earnings data and EPS trends for the companies above and more; examines past investor reactions to earnings in various contexts; gives options activity analysis; reviews previous-quarter earnings; and gives an opinion on both what earnings will look like and how investors will react based on the aforementioned data points.

Just a few of the correct calls made for Q3 so far were:

  • to be bullish on Qualcomm (QCOM) ahead of earnings.
  • to be bullish on Sodastream (SODA) ahead of earnings.
  • to be bearish on J.C. Penney (JCP) ahead of earnings.
  • A daily investment service that is committed to creating long-term wealth for its members,'s Recommended List of stocks is up 33.3% from 2008-2011 versus a -14.4% return for the S&P, a 47.7% outperformance, topping the benchmark each year since the start of the Great Recession. Subscribers receive actionable market commentary, access to 40+ stock ideas on the Recommended List, and real-time trade alerts. Plus, sign up for a free trial today to view Bull Market's in-depth Special Reports - including its annual High Yield and MLP reports - and its timely Earnings Previews, which are published every Friday during the heart of earnings season. Get a Risk-Free Trial to Bull Market Today! (Please note returns are unaudited.)