Ahead of Earnings: DHI, DNDN, DF, HMA

November 11, 2013, 09:00 am ET, BY Neal- Contributor| Editor: Thomas H. Kee Jr. (Follow on LinkedIn)

A few very important earnings releases are coming over the next few days.  We have conducted an analysis of these companies in order to provide investors with a summarized earnings analysis (both past and present), but also, and more importantly, a price-based observation that might be better suited for investors who are anticipating price action after earnings are released.

Of course, we already know that stocks sometimes do the exact opposite of what we might expect after earnings.  A stock might fall after it beats estimates, or increase after a miss, so although an evaluation of earnings data is clearly important, a close look at the recent decisions of smart money is as well.

This combination of simple earnings data and price-based analysis can help investors not only understand earnings results, but also anticipate the stock’s move after earnings are released.

The following Companies report earnings on November 12.

D.R. Horton, Inc. (NYSE:DHI) is scheduled to report $0.40 per share when the company reports quarterly earnings on Tuesday November 11 before the market open, which would be a 33% increase from the same quarter a year ago.  About 75% of DR Horton's total revenue comes from the Southeast, South Central and West segments. Investors will be watching interest rates carefully, because if rates begin to rise, consumer demand would fall and growth for D.R. Horton would decline.  The stock is down about 5% YTD, and more than 32% off the yearly highs in May.  Is the dip a buying opportunity ahead of earnings?

Shares of D. R. Horton are up 6% in the last three weeks, and getting closer to resistance.  Even if the company beats estimates, it does not mean the stock will continue to rise, based on price.  According to rule, we are sellers at resistance, and as long as the stock remains below resistance, we expect lower levels and a test of support. Based on the real-time trading report published by Stock Traders Daily, DHI is a sell/short at resistance, with risk controls in place if resistance breaks higher.

Dendreon Corporation (NASDAQ:DNDN) is scheduled to report Q3 earnings on Tuesday November 11.  Analysts’ estimates are for the company to lose $0.42 per share, which would be $0.62 better that the loss of $1.04 in the same quarter a year ago.  The company has been burning through cash and already has substantial debt, but the upside probably is not in the earnings.  The company has been rumored to be seeking a buyout, and if that is the case, it might be confirmed during the conference call.  The stock is down 54% YTD and more that 65% off the 52-week highs.  Is this a good time to buy shares of DNDN?

Shares of Dendreon have fallen over 27% in the last three months, but the stock still remains above support as that is defined in our real time report.  If shares moves lower and tests long-term support, we would be buyers near support. If support holds, we would expect a move higher and an eventual test of resistance. We would only be buyers near support and caution investors not to chase the stock ahead of earnings, as the stock is too far above support, going into earnings and the important conference call. 

Dean Foods Co (NYSE:DF) is expected to report a profit of $0.14 per share when the company reports its Q3 numbers on Tuesday November 12, which would be $0.52 less than the same quarter a year ago.  The company announced a 1-for2 reverse split in August, and the same day confirmed its prior full year 2013 guidance of adjusted diluted earnings of $0.47 to $0.53 per share on a pre-split basis, which translates to adjusted diluted earnings per share of $0.94 to $1.06 on a post-split basis.  The stock is up 32% YTD, however shares are off 14% from the yearly highs made in August.  Is the pullback an opportunity ahead of earnings?

The stock has bounced over 11% in the last month, while it gets closer to resistance.  Even if the company beats estimates on Tuesday, it does not mean the stock will continue to rise, as price matters.  According to rule, we are sellers at resistance, and as long as the stock remains below resistance, we expect lower levels and a test of support. Based on the real-time trading report published by Stock Traders Daily, DF is a sell/short at resistance, with risk controls in place if resistance breaks higher.

Health Management Associates Inc (NYSE:HMA) is expected to earn $0.15 per share when the company reports its Q3 numbers on Tuesday November 12 after the market close.  The company earned $0.18 per share in the same quarter a year earlier.  Health Management Associates announced that it will restate its financial statements for the years ended December 31, 2010, 2011 and 2012 and the quarters ended March 31 and June 30, 2013 to correct the accounting treatment of approximately $31.0 million of Medicare and Medicaid Health Information Technology payments recognized as income between July 1, 2011 and June 30, 2013.  The stock is up 35% YTD, however shares are down 25% from the 52-week highs in early July.  Is the stock a good buy ahead of earnings?

Investors need to be aware of price, and based on the Stock Traders Daily real-time trading report for HMA, the stock has been drifting closer to long-term support, but isn’t there yet. If the stock continues to move lower, and tests long-term support, we would be buyers near support. If support holds, we would expect a move higher and an eventual test of resistance. We would only be buyers near support and caution investors not to chase the stock ahead of earnings.

Navigating earnings can be tricky, sometimes investor’s earnings expectations are correct, but the stocks actually do the opposite of what they think it should have done after earnings, so our opinion based on price can help make investors make more well-rounded and sound investment decisions.

Stock Traders Daily has been providing comprehensive market analysis, and correlated trading strategies since January 2000, which was the virtual peak of the Internet Bubble.  Our objective is to provide strategies capable of making money in any market environment, and we have been doing that since inception.

Support and Resistance Plot Chart for

Real Time Updates for Repeat Institutional Readers:

Factset: Request User/Pass

Bloomberg, Reuters, Refinitiv, Zacks, or IB users: Access Here.