Earnings season heats up next week. In the spirit of the season, I thought it might be worth taking a look at a few provocative charts of companies releasing earnings next week. The charts provide a technical backdrop into the release of fresh fundamental information. They could be launching pads for price strength. Here are three to watch:
YUM Brands (YUM - Analyst Report)), Zacks Rank #3 (Hold):
YUM releases its profit report after the close on Tuesday. This restaurant operator has been trading in a range since the spring of 2012. The company has been dogged by poor results in China and contracting same store sales. However, technically it is near the upper half of its trading range and a clean move over the $75 region could generate some momentum buying. The bottom end of the range in the $61.00 to 62.00 area is a long way down. Its MACD (moving average convergence-divergence) and volume fail to provide much direction. Could earnings be a catalyst for an upside breakout?
The bull story for the stock comes from easy comparisons in China. Due to weak results in China in recent years, comps have been negative since Q4 2012. This easy base effect could brighten the sales picture and energize the stock. It is worth watching. An actual change in sales momentum on a low same store sales base would get attention. The stocks’ sideways pattern occurred when same store sales began their marked deceleration/decline.
According to the Zacks Consensus, YUM is expected to earn $0.93 in the reporting quarter and $0.87 in the quarter ending December. YUM has a decent track record of posting positive earnings surprise. It has beat 16 of the last 18 quarters.
ADTRAN (ADTN - Analyst Report)), Zacks Rank #3 (Hold):
ADTN releases its earnings Tuesday afternoon. This provider of networking and communication equipment has been trending upward since the fall of 2012 and is currently in a small channel consolidating for what seems to be a new leg higher. A rally over the $28 area would push prices above the channel and be a constructive dynamic for the uptrend arguing for continued strength. Not only has the $28 level provided resistance in recent weeks, but going back to the spring/summer period of 2012 off a set of old lows.
Based on the Zacks Consensus ADTN is expected to earn $0.22 in the reporting quarter and $0.19 in the December quarter. ADTN has a history of posting positive earnings surprises. It has not missed an estimate over the last 18 quarters, but has matched expectations twice in this time period.
JP Morgan (JPM - Analyst Report)), Zacks Rank #3 (Hold):
JPM reports on Friday morning. JPM has established a shelf of support in the $49 to $50 area. At the same time, it has been able to recover from declines below $50 in recent weeks. Momentum is improving given the uptrend in the MACD and the recent drop below $50 was not confirmed by the MACD. This bullish divergence is constructive for a rally. Furthermore, the formation since late August looks like a potential double bottom. A rally over the recent high at $53.87 would set the stage for the double bottom to be confirmed and project a move back toward the highs over $56 into the $58 area.
According to the Zacks Consensus, JPM is expected to earn $1.27 in the reporting quarter. Earnings in the banking sector are very noisy, but the stock has a history of generating positive earnings surprises. It has only disappointed once over the last 18 quarterly earnings releases.