3 Stocks to Buy Before Earnings Season - Investment Ideas
02 Juli 2013 - 12:15AM
Zacks
In the world of investing, past performance is certainly no
guarantee of future performance. A stock that has been going up for
years, may suddenly stop rising and start declining. Ditto for a
stock that has been sinking. In the blink of an eye it starts
rising.
The same is true during earnings season. Just
because a company beat the estimate the prior quarter doesn't mean
it will beat again this quarter.
But what if that company has put together a hot
streak of earnings beats?
What if a company has beaten not just two or three
quarters in a row but 20 quarters in a row- or 5 years- without a
miss?
Apple had put together just such an impressive
earnings surprise streak until it finally missed in late 2011. In
the 6 quarters since the miss, it has missed another 3 times. Share
price, however, peaked in between the second and third miss.
But during its earnings surprise streak, investors
were handsomely rewarded.
Perfection Isn't Easy
Even with all of the unknowns in investing, I'd
rather buy a company that is on an earnings hot streak, than one
that is dead cold.
Companies with a perfect earnings track record for
the last 5 years are a small select group. It's incredibly
difficult to keep beating for 5 years through all the ups and downs
in the economy. Management has to manage expectations very, very
well. There's little room for error. That takes skill (and maybe
some luck.)
These three companies haven't missed in 5 years. I
featured two of these companies last quarter and they came through
with another earnings beat.
Of course, an earnings beat doesn't necessarily
mean a stock will rise afterwards. Being light on guidance or an
earnings/sales warning, for instance, could put the damper on an
earnings beat. But I still like my chances with an earnings beat
versus an earnings miss.
Will their streaks continue this earnings
season?
3 Companies With Perfect Earnings Surprise Track
Records
1. Wyndham Worldwide
2. Jarden
3. Herbalife
1. Wyndham Worldwide (WYN)
Wyndham is one of the largest hospitality companies
in the world. It operates about 630,000 hotel rooms worldwide and
operates vacation rentals and exchanges with over 106,000 vacation
properties in 100 countries. It also operates a network of 190
timeshare properties with about 915,000 owners.
Forward P/E = 15.4
Expected 2013 earnings growth = 15%
Zacks Rank #3 (Hold)
Reporting second quarter results on July 24
2. Jarden Corporation (JAH)
Jarden owns over 100 of the most famous consumer
brands in the world including Rawlings, Crock-Pot, Mr. Coffee,
Sunbeam, Seal-a-Meal, and First Alert.
Forward P/E = 13.4
Expected 2013 earnings growth = 17.7%
Zacks Rank #3 (Hold)
Expected to report second quarter results on July 23
3. Herbalife Limited (HLF)
Herbalife makes a whole host of nutrition products
including protein shakes and snacks, energy and fitness drinks,
vitamins and nutritional supplements. It sells its products through
independent distributors in 85 countries.
The company has been in the news recently due to a
change in auditors resulting from the resignation of a partner with
its former auditor. It did not have to restate any financial
statements.
Forward P/E = 9.4
Expected 2013 earnings growth = 18.7%
Zacks Rank #2 (Buy)
Expected to report second quarter results on Aug 5
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Tracey Ryniec is the Value Stock Strategist for Zacks.com.
She is also the Editor of the Turnaround Trader and Value Investor
services. You can follow her on twitter at @TraceyRyniec.
APPLE INC (AAPL): Free Stock Analysis Report
HERBALIFE LTD (HLF): Free Stock Analysis Report
JARDEN CORP (JAH): Free Stock Analysis Report
WYNDHAM WORLDWD (WYN): Free Stock Analysis Report
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