Ahead of Earnings: SLW, HOLX, BID

November 07, 2013, 13:45 pm 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 11.

Silver Wheaton Corp. (USA) (NYSE:SLW) is expected to report $0.22 per share when the company reports Q3 earnings on Monday November 11 before the market open, which would be a 35% decline from the same quarter a year ago.  Silver Wheaton reported Q2 earnings of $0.20 per share, which was below expectations, while revenues fell 17.1% YOY to $166.89 million, which also missed expectations.  The company has missed earnings estimates in five out of the last eight quarters.  Last year 90% of revenue came from silver.  For 2013, SLW estimated the company would produce 33.5 million ounces of Silver.  After the first two quarters, they are more than half way there.  The stock is down 35% YTD and down 7% over the last month.  Is the stock a buy ahead of earnings? 

The stock bottomed out near support in late June, rallied 59% in two months but could not break above long-term resistance.  Now, the stock is sitting in the middle of a channel according to our real time trading report for SLW, so it does not look attractive as a buy ahead of earnings.  By definition we prefer to buy near support levels when they are tested because that allows us to maximize our return, our target is resistance and we want to get the complete oscillation from support to resistance, but it also helps us control risk, and that is the most important part.  When stocks are in the middle of a channel like this one they become less attractive, from a risk control perspective, especially ahead of an earnings report.

Hologic, Inc. (NASDAQ:HOLX) is expected to report a profit of $0.37 per share when the company reports its quarterly earnings on Monday November 11 after the market close, which would be in-line with the same quarter a year ago.  Shares of HOLX soared in July when the company named Jack Cumming its President and Chief Executive Officer.  Mr. Cumming joined Hologic in 2001 and served as Chief Executive Officer from 2001 to 2009.  However, the stock was unable to break above long-term resistance.  Shares of Hologic are up about 12% YTD and trading near long-term resistance again.  Is the stock a buy, sell or hold ahead of earnings?

Throughout 2013, smart money has been selling shares of HOLX when the stock tests long-term resistance.  Now, after an 8% increase in one month, the stock is sitting very close to resistance again, but this time right before earnings.  Even if the company beats estimates on Monday, it does not mean the stock will continue to rise, as the chart shows that 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, HOLX is a sell/short at resistance, with risk controls in place if resistance breaks higher.

Sothebys (NYSE:BID) is scheduled to report Q3 earnings on Monday November 11 after the market close.  Analysts are expecting the company to lose $0.47 per share, which would be a penny better than the $0.48 per share it lost in the same quarter a year ago.  The stock is up 63% YTD, driven by a stake increase from Third Point, the departure of company’s CFO, and news stories suggesting that hedge funds are looking to shake things up after the Sothebys said it plans to review its financial policies and capital allocation.  Is the stock a buy before earnings?

Shares of Sothebys are trading near two-year highs.  The stock is close to a test of long-term resistance, and right before earnings.  Even if Sothebys beats estimates on Monday, 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, BID is 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.

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.

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