Ahead of Earnings: EA, GILD, AFL, GNW
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 October 29.
Electronic Arts Inc. (NASDAQ:EA) is scheduled to post Q3 earnings on Tuesday October 29 after the market close. Analysts are expecting the company to earn $0.12 per share, which would be $0.03 less than the $0.15 it earned a year ago in the same quarter. The company recently settled a lawsuit regarding current practices around how athletes’ images, names and likenesses, which are used in videogames and on broadcast television. It could have implications on whether players would have a share in the millions in profits involved around college sports. E.A. said it would not be publishing a 2014 college football title, and will continue to mull the future of the company’s massively successful franchise. However, some good news is that Electronic Art’s game Plants vs. Zombies 2 reached over 16 million downloads worldwide, making it number one in the Apple App Store in 137 countries worldwide. The stock has soared 76% YTD, but the stock has pulled back about 12% off the 52-week highs. Is the recent pullback a buying opportunity?
Investors need to be aware of price, and based on the Stock Traders Daily real-time trading report, the stock is close to a test of support. Shares of EA have fallen over 7% in the last month, and if the stock continues to move lower, and tests 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 it is not there yet, so we caution investors to be patient.
Gilead Sciences, Inc. (NASDAQ:GILD) is expected to report $0.48 per share on Tuesday October 29 after the market close, which would be $0.02 less than the $0.50 it earned in the same quarter a year ago. Gilead Sciences is the second-best performing drug stock in the Standard & Poor's 500 index over the past 2 years. The stock is up 90% YTD and over 11% in the last month. The company has a strong drug pipeline, especially with its cancer drugs. Should investors buy, sell or hold shares of GILD ahead of earnings?
Even if GILD announces much better numbers than analysts expect, it does not mean the stock will continue to rise. Price matters, and insiders have sold over 653,000 shares just in the last month. According to the real-time trading report offered by Stock Traders Daily, shares of GILD are getting close to a test of long-term resistance, and as a rule we are sellers if resistance is tested (not quite there yet). If the stock does test long-term resistance, and remains below resistance, we would expect a full oscillation down to support. However, resistance also acts as our risk control, and if resistance breaks higher, bullish signs would surface.
AFLAC Incorporated (NYSE:AFL) is expected to report $1.48 earnings per share when the company reports its third quarter numbers on Tuesday after the bell. If the company meets analyst expectations, $1.48 would be a decline of 16% from last year’s $1.77 that it earned in the same quarter. The stock has been on a steady climb for the last few years, however one potential headwind is the weak economic conditions in Japan, as the Japanese market represents well over two-thirds of Aflac's profitability. The stock is up 22% YTD and up over 52% in the last two years. Is the stock a buy, sell or hold at current levels?
The stock is currently trading just under the 52-week high, and is close to testing long-term resistance. If the stock tests resistance, and remains below resistance, as defined in our real time trading report, Stock Traders Daily expects lower levels and a test of support. That would make AFL a sell/short at resistance, with risk controls in place if resistance breaks higher.
Genworth Financial Inc (NYSE:GNW) is expected to report $0.26 per share for the quarter, which would be a penny better than last year in the same quarter. The company reported its Q2 earnings data in June, which were earnings of $0.28 per share, $0.01 worse than the consensus estimate of $0.29, and revenues fell 1.3% YOY to $2.37 billion. Genworth Financial is expecting to offer an IPO for its Australia unit, which will most likely come next year. The stock is up 43% in just the last six months, and is trading near the 52-week high. Is the stock still a buy?
Even if Genworth Financial is able to beat estimates on Tuesday, it does not mean the stock will continue to rise, as stock price matters. Smart money could be looking to take some profits off the table. VP Kelly Groh sold 8,000 shares of the company’s stock in a transaction that occurred on Monday, October 21. The shares sold at an average price of $14.00, for a total value of $112,000.00. Shares are trading at three-year highs, and close to testing long-term resistance. If the stock tests resistance, and remains below resistance, as defined in our real time trading report, Stock Traders Daily expects lower levels and a test of support. That would make GNW a sell/short at resistance, with risk controls in place if resistance breaks higher.
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.