Looking Good Ahead of Earnings

 | Oct 15, 2012 | 7:00 AM EDT
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With earnings season in full swing, I regularly run screens for companies due to report in the coming days. I recently filtered for S&P 500 companies with fundamental and/or technical potential that are due to release earnings in the first part of the week.

Intuitive Surgical (ISRG), whose shares have been in retreat since their all-time high of $594.89 on April 18, is scheduled to report its third quarter Tuesday after the close. The company makes the DaVinci robotic surgical system.

Analysts are eyeing earnings of $3.48 per share on revenue of $534.93 million. Those would mark year-over-year gains of 14% and 19.8%, respectively.

Intuitive beat earnings views in each of the past four quarters.

The stock gapped down 8% on July 20, and another 4.2% in the following session, on the heels of the company's second-quarter report.

This is a stock with a high price-to-earnings ratio, and it may have been ripe for a tumble on any whiff of bad news. In this case, the company suggested that third-quarter earnings growth would slow down. Wall Street has lowered its full-year earnings forecast for Intuitive, and now sees 2012 wrapping up with earnings per share of $14.85, which would mark an increase of 21% over 2011.

The stock has spent most of the past three months beneath its 200-day moving average, and many institutional owners consider that to be a bearish condition. However, watch for a potential pick-up in buying if the company delivers good news Tuesday.

 Mattel (MAT) has been flat-lining since August, trading in a tight range and holding above its 10-week moving average.  The toy maker, shares of which zoomed out of a base in July, is set to report its third quarter before Tuesday's open. Wall Street is pegging income at $0.99 per share, and revenue is expected to be $2.08 billion -- both of which would constitute increases.

Fourth-quarter expectations are high, with hopes pinned on the company's Barbie and Monster High dolls and accessories. Guidance for the quarter could be the key to whether the stock rises or falls on the report.

After tight trading of the type that Mattel has frequently shown, further price gains tend to materialize. Institutions often hold shares if they have confidence in a stock, but are awaiting further bullish developments before they add to positions.  

Finally, an eagerly awaited report will come from eBay (EBAY) after the close Wednesday. Standard & Poor's -- and therefore most other analysts -- continue to categorize the company as an "information technology" name. However, the real story here surrounds the company's PayPal unit. Analysts will be watching for expansion here, as well as in the e-commerce arm.

Income is seen coming in at $0.55 per share on revenue of $3.4 billion. That would represent a gain of 15% on both the top and bottom lines.

Last month, eBay rallied to its best levels since January 2005, and it is currently in a retreat after its Sept. 14 multiyear high of $50.65. The stock's trading pattern over the past month has essentially been in tandem with that of the S&P 500, with eBay closing above its 50-day line Friday. As with any individual stock, a purchase ahead of the earnings report is best avoided.

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I reached out last week to my close friend Ken Shreve, who is a prominent writer for the IBD.  I asked Ke...
I reached out last week to my close friend Ken Shreve, who is a prominent writer for the IBD.  I asked Ke...
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