MINNEAPOLIS ( Stockpickr) -- Stocks finally managed to break their losing streak last week. For the first time in six weeks, the major indices closed the week in positive territory -- barely. Investors remain skittish.

If you were looking for excitement and for stocks that moved big one way or another last week, companies reporting earnings were a good bet. Best Buy ( BBY) offered up a strong report thanks to smartphone sales (mental note: watch stocks tied to smart phones when second-quarter earnings season begins). Shares jumped more than 7% on the news.

One of the biggest losers came late in the week. Winnebago ( WGO) shares sank a massive 16% in one day after it reported earnings that missed expectations. The company made a tiny 4 cents per share profit in the company's third quarter, compared with expectations for 13 cents per share.

Related: 5 Stocks With Big Insider Buying

Trading earnings in advance of the news can be hugely profitable. The key is to get a good read on expected results and how the stock will move as a result. Beating or missing the Wall Street number can trigger big moves in a stock.

Here's how to trade several stocks reporting earnings this week.

Carnival Cruise Lines

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Winnebago noted that higher fuel costs and weak employment numbers were to blame for its poor results. While those facts certainly make things more difficult, the actual impact on earnings appears to be on a case-by-case basis. Some companies are simply doing better than others at managing the situation.

For example, Delta Air Lines ( DAL) reported results in April that beat expectations that had been held lower thanks to rising fuel costs and the impact that might have on earnings. With the strong results, investors pushed shares of Delta up 20% in a few short days of trading after the report was released.

How will higher fuel costs impact Carnival Cruise Lines ( CCL) when it reports earnings results on Tuesday before the bell? Will it be a miss big like Winnebago situation or have a large beat like Delta situation?

Delta benefited from tight capacity and business flying in a strong economy. Winnebago was hurt as its products could be classified as a luxury. The cruise industry does not have the same tight capacity as the airline, thus a big beat thanks to droves of customers wanting to take a cruise last quarter is unlikely.

Shares of Carnival, one of the highest-yielding leisure stocks, have already fallen by 7%, and shares are attractively valued at current prices based on Wall Street average estimates. Analysts expect the company to make $2.55 this fiscal year and $3.09 the next, a 21% increase. Shares currently trade for just 14 times this year's average earnings estimate.

The bias here is for a stock gain. All that is needed is a report that does not miss expectations badly.

A big bet on Carnival in the first quarter came from Murray Stahl's Horizon Asset Management, which decreased its position in the stock by 35% but still held 1.3 million shares as of the end of the period.


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Drugstore company Walgreen ( WAG) reports earnings results on Wednesday. Shares of Walgreen are up 15% this year, making the stock one of the best performers in the market. It will take a strong report to hold those gains.

Over the last three quarters, the company has matched or beat Wall Street consensus estimates. In the quarter ended May 31, the estimate is for the company to make 62 cents per share. Will higher prices hurt performance?

Convenience shopping has been a key to Walgreen's success. Strong grocery results at Kroger ( KR) last week bode well for Walgreens. Estimates have been constant over the last 90 days, setting the stage for a possible surprise. If the so-called soft patch in the economy resulted in consumers doing more shopping closer to home combined with running to the drugstore, Walgreens could see stronger than expected results.

The problem for investors today is valuation. Shares of Walgreen trade for 17 times current-year earnings estimates of $2.60 per share. With earnings poised to jump 17%, the stock is about where it should be.

It will take a strong report to move the needle.

Walgreen shows up on 10 Vintage Stocks Worth a Fortune, 10 Dividend Stocks to Weather a Bad Economy and 8 Stocks to Buy in Case There's a Recession.

Bed Bath & Beyond

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Retail stocks are being punished by the market over the last few months. Household wares seller Bed Bath & Beyond ( BBBY) has seen its shares drop by about 7% since the end of April. That move is about in line with what the rest of the market has seen over the same period. It certainly could be worse.

Bed Bath & Beyond is tied to the housing market. When home sales, especially new construction, are strong, BBBY tends to do very well. With housing still in a slump, the company is missing a key element to its success. Surprisingly, the company has done well over the last two years without the housing benefit, its stock approximately doubling in that period.

For the current period, the Wall Street average estimate is for the company to make 63 cents per share. Analysts do not appear to be concerned about the macro economy negatively impacting results. The average estimate is 3 cents higher than it where it was 90 days ago.

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Perhaps what is happening to BBBY involves the replacement cycle, where things bought five to seven years ago are now being replaced. Such an argument presumes a strong consumer. That strength or lack thereof is a key debate at the moment.

I would be cautious with BBBY's Wednesday report. Results are likely to be negatively impacted by the soft patch.

John Hussman's Econometrics Advisors maintained a 1.2 million-share position in Bed Bath & Beyond in the first quarter, while Primecap Management trimmed its position slightly to 14.7 million shares.


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The market will get a good read on the economy with Wednesday's earnings report from FedEx ( FDX). The delivery company has its finger on the pulse of business activity. It is also reliant on transportation, thus fuel costs and the impact thereof will be seen in the report.

Shares of FedEx have dropped by 9% since the end of April. Investors are clearly expecting weakness with Wednesday's report. The average Wall Street estimate is calling for profits of $1.72 per share for the quarter ended May 31. That average estimate is 5 cents higher than it was 90 days ago. Over the last three quarters, FedEx has missed the mark. Given the soft patch in the economy, combined with higher fuel costs, another miss looks to be in store. When the company missed estimates in the last quarter, shares actually traded higher. We may get a different reaction this quarter.

With the recent selling, FedEx has a low valuation relative to expected earnings growth. For the fiscal year ended May 31, the company is expected to make $4.90 per share. That number jumps by 33% in the following year to $6.50 per share. Shares trade for only 18 times 2011 estimates.

Those estimates are only as good as company guidance. It is in the executive DNA to be conservative. I expect FedEx to use the soft patch in the economy to guide lower. If so, shares are likely to fall.

FedEx was highlighted recently in " 6 Dividend Stocks Rewarding Shareholders."


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The homebuilding market faces strong headwinds despite being years removed from the piercing of the homebuilding bubble. Foreclosures, short sales and sales of existing homes conspire against new construction. At the same time, commodity prices are such that making a profit is exceedingly difficult.

Earlier this year, investors were feeling more bullish on the sector. Homebuilder Lennar ( LEN) hit a post-financial crisis peak of $21.54 per share in February. Since that time, the stock is down 19%. It looks like another false start for the industry.

The weakness in Lennar shares comes at a time when operating results have been better than expected. This particular homebuilder has beaten estimates in each of the last four quarters by a wide margin. Selling appears to be a combined macro and valuation event. Prior to the selling, Lennar traded for approximately 1.5 times book value, about double what is considered to be historically cheap for a homebuilder.

That said, from an earnings perspective, Lennar looks attractive. For the current fiscal year, the average Wall Street estimate is for the company to make 51 cents per share. The following year the estimate is for Lennar to make $1 per share. Shares now trade for about 18 times the 2012 estimate.

If the company stays on track with those expectations when it announces earnings on Thursday, investors could see a small bounce in shares.

Lennar showed up on a list last month of 8 Housing Stocks With Upside.

To see these stocks in action, check out the 5 Earnings Trades portfolio.

-- Written by Jamie Dlugosch in Minneapolis.


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At the time of publication, author had no positions in stocks mentioned.

Jamie Dlugosch is a founder and contributor to MainStreet Investor and MainStreet Accredited Investor. Formerly, he was president and CEO of Al Frank Asset Management. He has contributed editorially to The Rational Investor, The Prudent Speculator, Penny Stock Winners and InvestorPlace Media.