5 Earnings Studs & 5 Duds

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Earnings season is an exciting time for investors as it is during these periods that fundamentally superior stocks rack up their biggest gains. What I look for every earnings season is stocks with not only the highest year-over-year earnings and sales growth, but also the ones with the most aggressive upward earnings report revisions. If analysts are scrambling to lift their estimates of how high a company's profits will actually be, it's a good sign that the company will post earnings figures in excess of analysts' predictions. And when it comes to earnings reports, investors like to be pleasantly surprised.

So I'm going to preview five of the best stocks picks on the market for this earnings season. They have the most aggressive upward earnings revisions and are fundamentally superior plays. I'm also going to give you the names of five earnings dogs that are likely to completely miss the mark and that should be avoided at all costs this earnings season.

5 Earnings Season Winners Western Refining Inc. (WNR)

Oil stocks have really taken off in the past few weeks with the events in Libya and other countries in the Middle East. Economists are getting worried about global supply shocks, but investors are getting excited about the huge profits that can be reaped in oil and gas plays.

As we near earnings season, I would advise you to begin picking up some oil and gas plays as these companies are receiving some of the most aggressive upward earnings revisions. Oil companies are benefiting from the rising price of oil, and the extra profits they book on these sales will be reflected in their results for the current quarter. One of these companies is Western Refining Inc. (NYSE: WNR ).

WNR is an independent crude oil refiner that operates in the western and southern parts of the United States. The company owns 150 service stations and also distributes oil on the wholesale level to construction, manufacturing and agricultural companies. These industries are really starting to pick up, and with the increased business the company will receive from these industries, Western Refining will likely increase its profits substantially.

For the current quarter, analysts are expecting WNR to post earnings of 27 cents per share, up significantly from its 35-cent-per-share loss last year. In fact, just two months ago, analysts had been expecting the company to post earnings of just 3 cents per share, indicating that analysts also think WNR will benefit from the windfall in oil prices. This is a very strong play going into earnings season.

WNR scheduled to report earnings on May 5.

Advanced Photonix Inc. (API)

Advanced Photonix Inc. (AMEX: API ) is a stock that's really starting to show some potential as we near its earnings announcement. I just recently started following this stock, but I'm already very excited for its prospects.

API is a thinly traded technology company that makes optoelectronic devices, which are machines that can source, detect and control light. These devices are used in light-emitting diodes (LEDs), fiber optic cables and photovoltaic (solar) cells. The applications for these gadgets are numerous and are in some of the hottest industries on the market right now.

That's why earnings expectations for API have improved so dramatically over the past year. The company posted a loss in each of the past four quarters, but this quarter analysts are expecting it to post break-even results. While this may not sound so great, breaking even is a triumph for companies operating in "next-generation" industries, and would be the first step for this company to posting results well in the black.

Analysts continue to revise their estimates higher on this stock, and API could very well surprise investors and post positive results when it announces. This is a great tech stock, and I would definitely recommend adding it to your portfolio before its earnings report.

API is scheduled to report earnings on June 27.

Neurocrine Biosciences Inc. (NBIX)

The next top stock on my radar for the coming earnings season is expected to post a 125% year-over-year increase in earnings. Neurocrine Biosciences Inc. (NASDAQ: NBIX ) is a biotechnology company that studies and develops treatments for neurological and endocrine-related diseases like depression and diabetes.

The company has several products in clinical development, including ones for mood disorders and cardiovascular disease. The important thing to remember about biotechnology companies is that they tend to pop when positive news is released about one of their drugs, e.g., if the government gives them approval for their treatments. Seeing as this company has several drug therapies in the queue, there are quite a few opportunities for us to get a bounce on this stock.

Analysts are expecting earnings of 5 cents per share for the current quarter and even greater earnings in the quarters ahead. This stock could be on the cusp of a great run-up, so if you're going to buy shares, do so now before the crowd catches wind of this opportunity.

NBIX is scheduled to report earnings on April 25.

LSB Industries Inc. (LXU)

LSB Industries Inc. (NYSE: LXU ) is another one of the companies that's jumping onto my radar this earnings season. The company makes products primarily for two industries: chemicals and climate control. For the chemicals industry, it makes various chemical solutions that it sells to agricultural companies, miners and electronics manufacturers. For the climate control industry, it makes various heating, ventilation and HVAC products.

The company has been around for a while, but it continues to surprise investors. Just last quarter it posted a 182% earnings surprise and, since that time, analysts have been aggressively revising their estimates higher. Experts are now predicting earnings of 59 cents per share when the company announces results for the first quarter, up from their previous estimate of 37 cents per share just three months ago. Year-over-year, this would represent a nearly 750% increase!

This stock really packs a punch and would be a great addition to any portfolio this earnings season.

LXU is scheduled to report earnings on May 2.

CVR Energy Inc. (CVI)

When you invest in stocks, it is very important to stay diversified. That is why I always recommend that you pick stocks from a variety of sectors and that you not be overweighted in one industry. At the same time, however, it is important to follow the growth, and this is especially true during earnings season. Well, this earnings season, much of the growth will be in oil and gas stocks. These companies are likely going to post the biggest earnings surprises due to the recent geopolitical crises that have sent up the price of oil. With that in mind, I've got another oil and gas recommendation for you.

CVR Energy Inc. (NYSE: CVI ) keeps popping up on my screens. This company, like WNR, refines and sells transportation fuels in the United States. It operates primarily in the central part of the country, and also produces and sells nitrogen fertilizer for agriculture.

The United States is increasingly exploring its energy independence, and companies like CVR are going to benefit from an increased reliance on domestic oil. Also, with the disastrous effects of floods and droughts throughout the world, countries will be looking to the United States to make up for shortfalls in the agricultural system. This will also benefit CVR as more agricultural companies buy its fertilizer.

In January, analysts had been predicting earnings of 22 cents per share for this company. Today, they're saying this company will post earnings of 64 cents per share. This is an incredible increase, and even still, analysts keep moving their targets higher. CVR could post a substantially higher number, and this would give investors a very welcomed surprise this earnings season.

CVI is scheduled to report earnings on May 3.

5 Earnings Season Dogs Tier Technologies Inc. (TIER)

It seems Tier Technologies Inc. (NASDAQ: TIER ) is in a race to the bottom. Just last year, I rated it a "B" ("buy") on my Portfolio Grader , but now it gets a solid "F" ("strong sell"). Its earnings expectations are terrible, and investors are running away from this stock like there's no tomorrow. Expectations are for a 7-cent-per-share loss in the current quarter, down from a prior projection of a 1-cent-per-share loss, and this company could very well even miss that estimate given that it has missed estimates, sometimes by triple-digit percentages, in each of the past four quarters.

TIER is scheduled to report earnings on May 11.

BioMarin Pharmaceutical Inc. (BMRN)

BioMarin Pharmaceutical Inc. (NASDAQ: BMRN ) makes outstanding products that help thousands of people suffering from rare diseases, but just because the company is doing good doesn't mean that its financials are faring well. The company is expected to post a loss of 10 cents per share in the current quarter. This is down from previous estimates by analysts of $0 per share. Looking back over past quarters, this company's performance has been somewhere erratic, so I would recommend that you stay away from this stock until it stabilizes.

BMRN is scheduled to report earnings on April 28.

Limelight Networks Inc. (LLNW)

Limelight Networks Inc. (NASDAQ: LLNW ) delivers content for emerging media companies in the United States, Europe and Asia. The company is on the cutting edge of a new industry, but it still hasn't figured out how to make an old-fashioned profit.

For the current quarter, analysts are expecting a 5-cent-per-share loss, and estimates keep getting revised downward. I say that you should stay clear of this stock for the time being.

LLNW is scheduled to report earnings on May 5.

MarineMax Inc. (HZO)

MarineMax Inc. (NYSE: HZO ) is a stock that I wish were doing better because it would mean that more people were spending time recreational boating. The company's products range from cruisers to yachts to fishing boats, but if you want to be able to afford one of its boats for yourself one day, I would recommend that you find another stock to invest in. Analysts are expecting the company to report a 10-cent-per-share loss in the current quarter, and the stock gets a solid "F" on Portfolio Grader.

HZO is scheduled to report earnings on April 25.

Cogdell Spencer Inc. (CSA)

Unlike the rest of the stocks on this "earnings dogs" list, Cogdell Spencer Inc. (NYSE: CSA ) is actually expected to post a profit in the current quarter. The reason it finds itself on this list is that analysts have been revising their profit estimates downward. This is a big red flag to me as it suggests that the company will post a negative earnings surprise when it reports. Cogdell is a real estate investment company, and I think the housing industry is still too volatile to invest in real estate stocks at this time.

CSA is scheduled to report earnings on May 5.

If you have any questions about whether your stock picks have what it takes to post solid numbers in the quarter ahead, run them through Portfolio Grader and make sure you check to see if analysts are revising estimates higher.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Stocks

Referenced Stocks: API , CVI , LXU , NBIX , WNR

Louis Navellier

Louis Navellier

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