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A flood of reports from other corporations follows next week before gradually slowing to a trickle by the month's end.
How investors perceive those numbers could well kick off an up- or downtrend in share prices that will continue for weeks, or even months.
That is especially true if there is an "earnings surprise."
An "earnings surprise" occurs when the revenues and profits a company reports differ significantly from analyst expectations.
Positive surprises – earnings that beat the pre-report forecasts – tend to drive stock prices higher, while negative surprises send them lower.
The bigger the surprise, the more rapid and dramatic the move becomes.
Will JPMorgan (NYSE: JPM) Earnings Surprise?
One prime candidate for an earnings surprise in this cycle is JPMorgan Chase.
Usually considered one of the strongest companies in the financial sector, JPM would normally be expected to surpass the pre-report estimates. After all, the company has beat earnings in three of the past four quarters – including an 11% surprise in the January-March period, when earnings came in at $1.31 a share vs. a projected $1.18.
However, the company has been rocked by controversy following revelations that it suffered more than $4 billion in trading losses on what JPM called a "hedging strategy" but others described as an outright "bet" on interest rates.
As a result, the stock price has fallen from $44.84 in early April to under $34.00 today. Meanwhile, the average analyst estimate for the company's second-quarter earnings has been slashed to just 79 cents a share, down from $1.24 two months ago.
Obviously, with that much uncertainty surrounding the size and nature of JPM's trading loss, as well as possible regulatory implications, an earnings surprise is quite possible when the numbers come out Friday.
What's more, given JPM's earnings history, its solid overall business performance and the sharply lowered expectations, that surprise will most likely be positive.
Even still, with a company as large as JPMorgan – a float of 3.78 billion shares and a market cap of $129 billion – the impact of even a sizable surprise on the stock price could be limited.
Five More Stocks Primed to Deliver this Earning Season
However, JPMorgan isn't the only company that could be ripe for an earnings surprise. The five below are also primed to surprise and could deliver sizable stock-price moves as a result:
Gannett Co. Inc. (NYSE: GCI), recent price $14.73 – GCI's share price is barely one-fifth of where it was five years ago, largely because of the market consensus is that print media is dead, and newspapers (82 dailies, 700 or so non-daily publications, plus USA Today) are the heart of Gannett's business. However, GCI has lots of other things going for it – ranging from digital media and advertising to employment services and online shopping networks – that analysts have consistently undervalued. GCI beat estimates in three of the last four quarters, including a 9.7% surprise last time, and will likely beat the 53-cent projection when it reports before the market opens Monday.
Travelzoo Inc. (Nasdaq: TZOO), recent price $22.90 – This provider of Internet travel, entertainment and dining bargains around the globe has beaten estimates the last three quarters, including a 14.3% surprise in the period ending Dec. 31, 2011. Investors, thinking the sluggish economic recovery will reduce discretionary travel, have beaten the stock down from a high of $90.80 a few months ago, but the poor economy could actually increase demand for travel bargains. Analysts have raised projections to 41 cents a share from 38 cents 60 days ago, but results on Monday could be surprisingly better.
J.B Hunt Transport Services Inc. (Nasdaq: JBHT), recent price $58.73 – Pull onto any Interstate highway for a few miles and you'll see a J.B. Hunt truck – and the stock has nearly doubled since last October, largely due to declining fuel prices. That's why JBHT has beaten estimates the last four quarters, and why analysts are projecting a 15.7% rise in earnings to 66 cents a share this time around. However, the weak economy has hurt the company's three other divisions and that could offset trucking strength, resulting in a negative earnings surprise on Monday – and a drop in the stock price.
Genuine Parts Co. (NYSE: GPC), recent price $60.97 – This distributor of replacement auto parts has beaten estimates in each of the last four quarters, pushing the stock near its 52-week high. However, at $1.08 a share, estimates for this quarter are well above past periods and could prove to be much too high given that the one area that defied the sluggish economy in the second quarter was new-car sales. That means reduced demand for replacement parts, and a possible negative surprise when GPC reports Thursday.
Wynn Resorts Ltd. (Nasdaq: WYNN), recent price $100.69 – Gambling has traditionally been recession resistant, but this time has been an exception. That, plus the economy's negative impact on the resort element of Wynn's properties, has resulted in missed expectations in two of the past four quarters. However, in the two periods with positive surprises, estimates were beaten by 53.8% and 20.2% – and a positive surprise of equal magnitude could easily come when Wynn reports Friday, especially since analysts have lowered projections by 8 cents (to $1.57 a share). With the stock $70 below its 52-week high, it has plenty of room to rise on good news.
Related Articles and News:
- Money Morning:
JPM Losses Get Worse and Worse
- Money Morning:
Using Options to Make a Quick Profit on J.P. Morgan Earnings
- Chicago Tribune/Reuters:
U.S. earnings outlook pounded by global turmoil
- Yahoo! Finance:
Corporate Earnings Calendar
Definition of "Earnings Surprise'