Earnings Roll, and the Beats Go On

NEW YORK (TheStreet) -- "And the Beat Goes On" was a huge hit for Sonny & Cher way back in 1967. This has to be the theme song for the Q4 2012 earnings season as "drums keep pounding a rhythm to the brain" as company after company beat earnings expectations.

On Jan. 7 I kicked off my analysis of the Q4 earnings in Overvalued Stocks Raise the Earnings Bar, and the drumbeat began with Monsanto ( MON) ($96.11) reporting before the bell on Jan. 8. The company beat EPS estimates by 25 cents per share by earning 62 cents per share. The stock gapped high and my monthly risky level at $99.53 soon became a pivot. This week Monsanto has been downgraded to hold from buy with the stock at $102.41.

After the close on Jan. 8, Alcoa Inc ( AA) ($9.26) matched expectations earning 6 cents per share and the stock gapped higher to $9.33 the next morning on positive guidance, then dipped to and held its 200-day simple moving average on Jan. 16, now at $8.82. The stock maintained a hold rating and rebounded to $9.20 yesterday.

After the close on Jan. 9, Constellation Brands ( STZ) ($36.75) reported an earnings beat of 8 cents a share earning 63 cents per share. The stock gapped higher that morning, but the stock drifted lower to $34.46 on Jan. 14 before setting a new all time high at $38.99 on Jan. 17. The stock has maintained its buy rating with a weekly pivot at $37.47 and monthly risky level at $41.03.

Before the open on Jan. 11, Wells Fargo ( WFC) ($34.94) beat EPS estimates by 4 cents earning 91 cents per share. The stock has moved sideways since this report between my annual pivot at $34.17 and quarterly risky level at $36.83 while maintaining a buy rating.

On Jan. 14, I continued my analysis in Earnings From These Seven Stocks Should Set the Market's Tone, and the earnings beats continued. Before the open on Jan. 15, Lennar ( LEN) ($40.95) beat EPS estimates by 12 cents earning 56 cents per share. The stock declined to $39.80 that day then popped to another new multi-year high at $42.34 on Jan. 18, as my monthly pivot at $40.58 became a magnet. Lennar still has a buy rating without a risky level at this time.

Before the open on Jan. 16, Goldman Sachs ( GS) ($137.13) beat EPS estimates by a whopping $2.13 earning $5.60 per share. The stock popped higher setting a new 52-week high at $146.28 on Tuesday. The stock maintained its buy rating with this week's value level at $139.29 with my semiannual risky level at $180.10 where the stock traded back on April 17, 2010.

After the close on Jan. 17, Intel ( INTC) ($22.00) beat EPS estimates by 3 cents earning 48 cents per share. Intel gapped lower at the open on Jan. 18 trading as low as $21.03 versus the weekly pivot at $21.17 on cautious forward guidance. Intel still has a buy rating with my semiannual value level at $19.80 with this week's pivot at $21.81 and quarterly risky level at $24.88.

Before the open on Jan. 18, General Electric ( GE) ($21.13) beat EPS estimates by a penny earning 44 cents per share. General Electric traded as high as $22.20 on Tuesday. Going into this report General Electric was upgraded to buy according to www.ValuEngine.com. My semiannual value level is $19.17 with a quarterly pivot at $21.19 and monthly risky level at $22.26.

Before the open on Jan. 18, Schlumberger ( SLB) ($73.75) reported in-line EPS earning $1.08 per share. SLB traded up to $78.04 on Tuesday. The stock remains buy rated with this week's value level at $72.99 with semiannual risky level at $94.62.

On Jan. 21, I wrote, How to Trade the Big Stocks Reporting Earnings Tuesday and the beats go on, as eight of the nine stocks I profiled beat EPS estimates. I will provide a scorecard on these plus Apple tomorrow.

The Dow Industrial Average (13,712.21) closed Tuesday above my quarterly pivot at 13,668 and its daily chart has become even more overbought with a 12x3x3 daily stochastic reading at 95.09 on a scale of 00.00 to 100.00 with a reading above 80.00 being overbought. A close this month above 13,668 puts the focus on my quarterly and semiannual risky levels at 14,118 and 14,323.

Without a monthly close above 13,668 on Dow industrials the risk is to my annual pivot at 5469 on Dow transports, which closed Tuesday at another new all time closing high at 5757.44. To confirm a Dow Theory Buy Signal the Dow industrials need to have a daily close above its all-time closing high of 14,164.53 set on October 9, 2007.

The daily chart for Dow transports is even more overbought with its 12x3x3 daily stochastic reading at 97.44, one of the highest levels I can recall.

Fundamentally, ValuEngine.com shows the most overvalued configuration for this stage of the stock market rally. We show just 40.6% of all stocks undervalued with 59.4% overvalued. All 16 sectors remain overvalued with 8 overvalued by double-digit percentages; consumer staples by 25.9%, construction by 21.8%, transportation by 21.2%, industrial products by 18.8%, finance by 14.7%, retail-wholesale by 14.0%, medical by 13.7% and computer & technology by 13.1%.

At the time of publication the author held no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Richard Suttmeier has an engineering degree from Georgia Tech and a master of science from Brooklyn Poly. He began his career in the financial services industry in 1972 trading U.S. Treasury securities in the primary dealer community. In 1981 he formed the Government Bond Department at LF Rothschild and helped establish that firm as a primary dealer in 1986. Richard began writing market research in 1984 and held positions as market strategist at firms such as Smith Barney, William R Hough, Joseph Stevens, and Rightside Advisors. He joined www.ValuEngine.com in 2008 producing newsletters covering the U.S. capital markets, and a universe of more than 7,000 stocks. Richard employs a "buy and trade" investment strategy and can be reached at RSuttmeier@Gmail.com.

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