8 Stocks to Consider Ahead of Earnings

NEW YORK ( TheStreet) -- Earnings season kicked into high gear Friday morning when JPMorgan Chase ( JPM) reported its quarterly results.

No offense to Alcoa ( AA) but JPMorgan's numbers always mean much more to the broad market as what many consider the best of the big money-center banks provides a barometer of what to expect from the rest of the group -- Bank of America ( BAC), Citigroup ( C) and Wells Fargo ( WFC) -- as well as insight into how Goldman Sachs ( GS) and Morgan Stanley ( MS) may have fared in their overlapping investment bank and trading businesses.

Of course, Jamie Dimon & Co. disappointed, and the group fell accordingly.

The theory is out there that the diminished earnings growth expectations for the fourth quarter can be spun as a potential positive catalyst for stocks. Through Thursday, according to Thomson Reuters, the blended (reported and estimated) earnings growth rate for the S&P 500 sat at 6.8%, down from 15% on Oct. 3.

The drop reflects analysts scrambling to take into account an outsize number of warnings as well as the uncertainty presented by Europe's ongoing sovereign debt problems and the plodding growth of the U.S. economy (which is of course better than no growth at all).

The pre-announcements continued to roll in this week, and the bad is still outnumbering the good by a wide margin. Through Thursday, 100 companies in the S&P 500 had issued negative pre-announcements vs. 30 positive and 11 in-line ones. That's a full 20% of the S&P 500 having already gone on the record with disappointing numbers, usually against their own prior guidance rather than Wall Street's consensus view.

The culprits this week alone included disparate names like Juniper Networks ( JNPR) and Tiffany & Co. ( TIF), illustrating the forces driving the lower outlooks aren't limited to particular industries or geographies.

To help navigate such a challenging environment, Birinyi Associates offered up an earnings cheat sheet earlier this week, isolating eight companies that have recorded both higher than expected earnings and higher than forecast revenue in at least 80% of prior periods.

The list includes eBay ( EBAY), Intuitive Surgical ( ISRG), lululemon Athletica ( LULU), MasterCard ( MA), Priceline.com ( PCLN), Under Armour ( UA), United Continental Holdings ( UAL), and Visa ( V).

Here's the details on the upcoming quarterly reports for each of these names, as well as some analysis.

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eBay

Friday's Closing Price: $30.62

12-Month Median Price Target: $39

Implied Potential Return: 21%

Forward Annual Dividend Yield: N/A

Current Analyst Coverage Breakdown: Of the 34 analysts covering the shares, 20 have either strong buy (11) or buy (9) ratings vs. 13 holds and one underperform.

Commentary: The online auctioneer is slated to report its fiscal fourth-quarter results on Jan. 18, and Wall Street is expecting eBay to report a profit of 57 cents a share in the December-ended quarter on revenue of $$3.33 billion.

The stock has gained more than 8% in the past year, bouncing through the final quarter of 2011 after scraping a 52-week low of $26.86 on Aug. 19.

PayPal continues to be a juggernaut for the company. When eBay reported its third-quarter results in October, it projected that PayPal's mobile total payments volume would exceed $3.5 billion for 2011, up from just $750 million in 2010.

While eBay does have the strong track record to topping the consensus view, it's not known for blowing away expectations. The company's average upside earnings-per-share surprise over the past eight quarters is just 5%.

Check out TheStreet's quote page for eBay for year-to-date share performance, analyst ratings, earnings estimates and much more.

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Intuitive Surgical

Friday's Closing Price: $459.44

12-Month Median Price Target: $466.50

Implied Potential Return: 1.5%

Forward Annual Dividend Yield: N/A

Current Analyst Coverage Breakdown: Of the 17 analysts covering the shares, 6 have either strong buy (2) or buy (4) ratings vs. 10 holds and one underperform.

Commentary: The maker of the da Vinci robotic surgery system is slated to report its fiscal fourth-quarter results on Jan. 19, and Wall Street is expecting a profit of $3.32 a share in the December-ended period on revenue of $483.7 million.

The less than bullish analyst sentiment on Intuitive Surgical reflects some nervousness about valuation as the stock was one of the top performers in the S&P 500 in 2011, rising roughly 60% in the past year, topping out at $443 on Oct. 28.

The company has posted strong sequential growth on the top and bottom lines in all three quarters of fiscal 2011 so far with revenue rising to $446.7 million in the third quarter from $388.1 million in the first quarter.

Intuitive Surgical's average upside earnings surprise over the past eight quarters is a healthy 13.1%, and it will need to beat the consensus by a representative amount to support the stock, which currently trades at a forward price-to-earnings multiple of 32.3X vs. a multiple of 12.2X for the S&P 500.

Check out TheStreet's quote page for Intuitive Surgical for year-to-date share performance, analyst ratings, earnings estimates and much more.

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lululemon Athletica

Friday's Closing Price: $61.96

12-Month Median Price Target: $64.50

Implied Potential Return: 4%

Forward Annual Dividend Yield: N/A

Current Analyst Coverage Breakdown: Of the 24 analysts covering the shares, 13 have either strong buy (6) or buy (7) ratings vs. 10 holds and one underperform.

Commentary: Everyone's favorite supplier of yoga apparel has already popped the cork on the fourth quarter to some extent, lifting its outlook earlier this week ahead of an appearance by CEO Christine Day at an investor conference in Miami.

The company now expects earnings of 47 to 49 cents a share for the December-ended quarter, up from its prior profit view of 40 to 42 cents a share. Revenue is now projected to come in between $358 million to $363 million vs. a previous projection of $327 million to $333 million. Same-store sales are seen rising in the low-to-mid 20% range.

Shares of lululemon are up more than 70% in the past year, and it's close to making another run at its 52-week high of $64.49 set back on July 20.

The performance has backed up the valuation though. If fourth-quarter revenue comes in at the midpoiint of the company's updated view -- $360.5 million -- it would represent an increase of more than 90% from the first-quarter total of $186.8 million.

Check out TheStreet's quote page for lululemon Athletica for year-to-date share performance, analyst ratings, earnings estimates and much more.

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Mastercard

Friday's Closing Price: $339.08

12-Month Median Price Target: $403

Implied Potential Return: 19%

Forward Annual Dividend Yield: 0.2%

Current Analyst Coverage Breakdown: Of the 35 analysts covering the shares, 26 have either strong buy (14) or buy (12) ratings vs. 9 holds.

Commentary: Mastercard is slated to report its fiscal fourth-quarter results on Feb. 2, and Wall Street is expecting earnings of $3.95 a share for the December-ended period on revenue of $1.73 billion.

A steady earnings performer, Mastercard shares are up nearly 45% in the past year as consumer use of plastic instead of cash has ballooned. For the third quarter, the company said worldwide purchase volume rose 17.2% year-over-year to $628 billion.

Mastercard has beaten the consensus earnings-per-share view in seven straight quarters, delivering an average upside surprise of 9.3%. Guggenheim Securities has a buy rating on the stock with a $415 price target but the firm trimmed its earnings estimate for the fourth quarter on Dec. 16 by 30 cents to $4.05 to reflect a slight slowing in margin growth. Buyback activity could narrow the gap though.

"While risk to our estimates is possible from less margin expansion, share repurchases could exceed expectations," the firm said. "Additionally, our estimates reflect a three-year CAGR compounded annual growth rate for EPS of 23%, which appears reasonable relative to management's expectations for 20%+ EPS growth from 2011-2013."

Check out TheStreet's quote page for Mastercard for year-to-date share performance, analyst ratings, earnings estimates and much more.

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Visa

Friday's Closing Price: $100.74

12-Month Median Price Target: $110

Implied Potential Return: 8.4%

Forward Annual Dividend Yield: 0.9%

Current Analyst Coverage Breakdown: Of the 35 analysts covering the shares, 28 have either strong buy (14) or buy (14) ratings vs. 7 holds.

Commentary: Visa is slated to report its fiscal first-quarter results on Feb. 8, and Wall Street is expecting a profit of $1.45 a share in the December-ended period on revenue of $2.47 billion.

The stock has advanced more than 42% in the past year, riding the same trend toward increased credit and debit card usage as Mastercard. Its 52-week high came on Dec. 27 at $103.45, and the current forward price-to-earnings multiple of 14.8X is slightly cheaper than Mastercard's at 15.6X.

Visa is one of Evercore Partners' Conviction Buys with an overweight rating and a price target of $130.

"The leading global retail electronic payments network, Visa offers 19% EPS growth potential for 2012, driven by estimated 1) 15% global payments volume growth; 2) 11% processed transaction gains; and 3) increased card-related revenue," the firm said. "The secular shift from paper to electronic payments should continue to drive increased debit and credit-card transactions over time."

Check out TheStreet's quote page for Visa for year-to-date share performance, analyst ratings, earnings estimates and much more.

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Priceline.com

Friday's Closing Price: $482.43

12-Month Median Price Target: $622.50

Implied Potential Return: 29%

Forward Annual Dividend Yield: N/A

Current Analyst Coverage Breakdown: Of the 23 analysts covering the shares, 18 have either strong buy (5) or buy (13) ratings vs. 4 holds and one underperform.

Commentary: Priceline.com is slated to report its fiscal fourth-quarter results on Feb. 20, and Wall Street is looking for earnings of $5.05 a share in the December-ended period on revenue of $966.4 million.

The stock has risen nearly 9% over the past year, ranging from a 52-week high of $561.88 on May 2 to a low for the year of $411.26 on Oct. 4. At current levels, since hitting that nadir, the shares have bounced more than 15%.

The company reported strong growth in travel bookings in its fiscal third quarter, and investors are expecting more of the same. Gross bookings totaled $6.3 billion for the quarter, including taxes and fees, up 56.2% from a year ago as Priceline.com grabbed market share in bookings for hotel rooms and rental cars and delivered 8% growth in its airline ticketing business, its best showing in the past seven quarters.

Priceline.com has beaten the consensus view in eight straight quarters, delivering an average upside surprise of 10.1%.

Check out TheStreet's quote page for Priceline.com for year-to-date share performance, analyst ratings, earnings estimates and much more.

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Under Armour

Friday's Closing Price: $77.17

12-Month Median Price Target: $83.50

Implied Potential Return: 8.2%

Forward Annual Dividend Yield: N/A

Current Analyst Coverage Breakdown: Of the 25 analysts covering the shares, 10 have either strong buy (7) or buy (3) ratings vs. 13 holds, one underperform and one sell.

Commentary: Under Armour is slated to release its fiscal fourth-quarter results on Jan. 26, and Wall Street is expecting earnings of 63 cents a share in the December-ended period on revenue of $405.3 million.

The Baltimore-based maker of athletic apparel has seen its stock jump nearly 37% in the past year, pushing its forward price-to-earnings multiple to 33X. The lukewarm analyst sentiment on the company reflects concerns about valuation and slowing topline growth.

An in-line revenue performance from UnderArmour in the fourth quarter would be a sequential decline from the company's third-quarter total of $465.5 million, but it would still be an increase of 35% from its year-ago total of $301.2 million.

Check out TheStreet's quote page for Under Armour for year-to-date share performance, analyst ratings, earnings estimates and much more.

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United Continental Holdings

Friday's Closing Price: $18.43

12-Month Median Price Target: $32

Implied Potential Return: 73.6%

Forward Annual Dividend Yield: N/A

Current Analyst Coverage Breakdown: Of the 16 analysts covering the shares, 15 have either strong buy (5) or buy (10) ratings vs. 1 hold.

Commentary: United Continental reports its fiscal fourth-quarter results on Jan. 23, and Wall Street is expecting a profit of 14 cents a share in the December-ended period on revenue of $8.93 billion.

The airline is the only stock on the list that's down in the past year, falling nearly 30%. Since hitting a 52-week low of $15.92 on Aug. 8 though, the shares have advanced close to 16% at current levels.

Sterne Agee reiterated a buy rating and $32 price target on the stock this past Wednesday but trimmed its still well above-consensus earnings estimate for the fourth quarter to 28 cents a share from 54 cents a share after the company reported traffic and revenue per available seat figures for the period that were lower than its projections. The estimate change aside, the firm is still a big bull on United Continental.

"Despite the adjustments to December figures, we continue to believe that UAL will benefit as it grows its share of higher-yielding business travel, and improves its operations via the integration of the Continental network and an upgrade of its fleet," Sterne Agee said.

Check out TheStreet's quote page for United Continental for year-to-date share performance, analyst ratings, earnings estimates and much more.

-- Written by Michael Baron in New York.

>To contact the writer of this article, click here: Michael Baron.

>To submit a news tip, send an email to: tips@thestreet.com
Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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