This earnings season, European developments have overshadowed company news. Though broad market whipsaws have become the norm, some individual stocks have been making big moves -- sometimes independent of the market -- following their earnings reports.
For example, MasterCard (MA), Intuitive Surgical (ISRG), Deckers Outdoor (DECK) and Starbucks (SBUX) are among the growth stocks that bolted higher on better-than-expected quarterly reports and guidance.
On the flip side, Netflix's (NFLX) post-earnings gap-down was widely publicized. Less well known is Perrigo's (PRGO) 8.5% gap lower Oct. 27, after the generic drugmaker's third-quarter report. Netflix's shortcomings are pretty much common knowledge: After a series of missteps, the company reported discouraging numbers about customer defections. What happened at Perrigo? It beat views and issued good guidance, but analysts said competition in its industry is heating up -- hence the gap-down.
I've been considering these moves ahead of reports from a few growth names that are expected next week. Growth names -- even large-caps like MasterCard or Starbucks -- can often show bigger price moves than so-called blue chips, or dividend-paying DJIA components.
With that in mind, I'm eyeing Wednesday's third-quarter report from Accretive Health (AH), which I have been tracking as a watch-list candidate. The company provides a range of management services to hospitals and other health care providers. Ahead of its report, the stock has some positive characteristics. First, the company boasts solid earnings growth in the past three quarters. The mid-cap's evenue has been 21% or higher during that time. And it has a solid return on equity of 28%.
The stock is also youthful, having gone public in May 2010. Newly public companies frequently sport some of the market's best growth. Technically, there's a reason for optimism: Its most recent price consolidation undercut the prior intermediate lows. Such price action can mean that investors lacking conviction have been flushed out, and new money enters the stock as value investors jump in. Upside volume has been slightly above average recently.
After a very orderly run-up along the10-week average last year and early this year, the character of trading has changed since May, becoming more erratic, as trading in the indices did the same. While this stock is still about 18% below its previous high, it's too far from a technical buy point for me to consider. However, good earnings and guidance could result in an upside move. I'll be watching the earnings news carefully.
I've also been tracking Ralph Lauren (RL), which reports its second quarter on Wednesday. Analysts expect year-over-year gains for the fashion icon's top and bottom lines.
The stock's recent price action has been sloppy, with wide price swings in tandem with the broader market. It pulled back from last week's all-time high of $164.55, but found support at its 20-day moving average. If that support holds, the stock could offer a buy point between that recent level and the prior high.
Many of its clothing-industry peers have been solid fundamental and technical performers lately. Strength from industry peers following earnings is an encouraging sign; if this company follows those precedents, the report and guidance could bode well.
Finally, one of the most closely watched growth names, Green Mountain Coffee Roasters (GMCR) reports after Wednesday's close. The stock is trading almost 40% below its September all-time high of $115.98. That's a fairly steep correction, and I'm not inclined to enter this stock any time soon.
Hedge fund manager David Einhorn recently made negative comments about the company's business prospects, but plenty of analysts disagreed. The proof will be in the numbers Wednesday, with traders also listening for guidance.
The current price decline is larger than ideal, even for a growth stock, which can correct at a higher rate than the general market in a downturn. However, there could be a silver lining: As noted in the discussion about Accretive Health, a pullback that undercuts prior lows can attract bargain shoppers, who send the stock higher again.
But the story behind Green Mountain has taken on added significance lately, so this next earning report has the potential to provide a caffeine-like jolt to investors.
