Cautious Ahead of Earnings: Broadcom Corporation (BRCM), Panera Bread Co (NASDAQ:PNRA), RF Micro Devices, Inc. (RFMD), Nabors Industries Ltd. (NBR)

October 18, 2013, 11:19 am ET, BY Neal- Contributor| Editor: Thomas H. Kee Jr. (Follow on LinkedIn)

Earnings season is just getting underway, and 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 22 2013.

Broadcom Corporation (NASDAQ:BRCM) is expected to report Q3 earnings on Tuesday October 22 after the market close.  Analyst’s estimates are for the company to earn $0.69 for the quarter, which would be $0.03 less than the same quarter a year ago.  Shares of BRCM lost over 20% of their value after the company announced during its last conference call that for the third quarter of 2013 it expected total net revenue of only $2.05 billion to $2.20 billion, when most analysts were expecting the company to report revenue of $2.25 billion. That news came about a week after the company said it would no longer be providing the chips for the Samsung Galaxy S 4 smartphone.  The stock is down 18% YTD, leaving investors wondering if all the bad news is factored into the stock price.  Is BRCM a buy, sell or hold? 

According to the real-time trading report offered by Stock Traders Daily, shares of BRCM recently bounced about 8% higher off the 52-week lows in late August, and are now getting close to a test of resistance, and as a rule we are sellers if resistance is tested (it is not there yet).  If the stock does test long-term resistance, and remains below resistance, we would expect a full oscillation to support, that would make it a short at that level too. However, resistance also acts as our risk control, and if resistance breaks higher we would also consider that a sign to exit any short positions. 

Panera Bread Co (NASDAQ:PNRA) is set to report its Q3 earnings after the market close on Tuesday October 22.  The company is expected to earn $1.35 per share, which would be a 9% increase from the same quarter a year ago.  The stock was up over 22% YTD at one point, however shares are now flat for the year after a big pullback.  The company disappointed investors when the it reported second-quarter earnings per share of $1.74, which were up 16% from a year ago, but $.03 below analysts' estimates. Same-store sales were up 3.7%, which was also lower than the 4.4% expectations. The company said it would adjust prices and add more employees during busy lunch hours to shorten lines and speed up table turnovers, but the stock has fallen more than 16% from the highs in June. Is the stock finally a buy?

Investors need to be aware of price because that is what makes us money, and based on the Stock Traders Daily real-time trading report, the stock is moving 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 it is not there yet.

RF Micro Devices, Inc. (NASDAQ:RFMD) is expected to post a profit of $0.10 for the quarter when it reports earnings on Tuesday October 22 after the bell, which would be $0.07 better than the same quarter a year ago.  The stock is up 34% YTD, and up over 25% in the last two months alone.  RF Micro has benefited from its presence in both the iPhone 5S and 5C, and the company looks well positioned to continue to see growth driven by the LTE smartphone platforms, as well as cost saving initiatives.  After a big move up in share price, should investors be taking profits?

The stock has made a big move higher over the last few months, and most of the news on the company has been very positive, so it is important for investors to focus on price.  Smart money might be taking profits soon, as company VP Administration and CFO, William A. Priddy, sold shares at $5.99 on October 4.   Even if the company beats estimates handily, 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, RFMD is a sell/short at resistance, with risk controls in place if resistance breaks higher. 

Nabors Industries Ltd. (NYSE:NBR) is expected to report $0.19 for its third quarter when the company reports on Tuesday October 22 after the market close, which would be a decline of 54% compared to the same quarter a year ago.  The company last announced its earnings results in July when, it reported $0.08 EPS for the quarter, missing the estimate of $0.09 by $0.01. The company had revenue of $1.51 billion for the quarter, compared to the consensus estimate of $1.58 billion. During the same quarter in the prior year, the company posted $0.38 earnings per share. The company’s quarterly revenue was down 6.2% on a year-over-year basis. Analysts expect that Nabors Industries will post $0.84 EPS for the current fiscal year.  The stock is testing the same resistance levels it tested in February, when it made the yearly highs.  Should investors be buying or selling at current levels?

The stock is up over 20% YTD, and trading close to its 52-week high.  The stock is very close to a test of long-term resistance, and right before earnings.  Even if the company beats estimates handily, 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, NBR 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.

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