These Two Companies Prove Earnings Season Is Far From Over

Chris Johnson

Earnings season may be winding to a close, but it isn't dead yet. In fact, there are 20 S&P 500 companies on the docket this week.

One sector seeing a considerable amount of activity this week is retail, with 15 (about 20%) of the SPDR S&P Retail Index (NYSE Arca: XRT) reporting.

Although several big names have already had their turn in the earnings confessional – including Walmart Inc. (NYSE: WMT), Macy's Inc. (NYSE: M), and Home Depot Inc. (NYSE: HD) – this week has a respectable lineup with the likes of Kohl's Corp. (NYSE: KSS), Lowe's Companies Inc. (NYSE: LOW), and Target Corp. (NYSE: TGT).

Earnings can be a tricky trade, as there are many moving parts.

Of course, there are earnings and revenue and their accompanying analyst expectations. Then there's the guidance that some companies choose to provide.

And many companies have distinct metrics that grab the Street's attention, such as specific product sales (e.g., iPhones), subscriber growth for cell providers, or same-store sales in the retail space.

Beyond that, of course, is how the market reacts to all this information. That can be the trickiest part of all, as results may beat expectations but still not live up to investor expectations.

We often see this for stocks that have run up into earnings, only to fall back on a solid report that failed to beat estimates by a wide enough margin.

While I usually trade stocks before earnings, I also like the post-earnings play. By taking the uncertainty of earnings and the subsequent reaction out of play, I can rely on my tried and true indicators that underlie my Best in Breed (BIB) methodology.

With that in mind, my BIB model identified two stocks that should outperform the broader retail sector over the next month.

One is a well-known name that just reported this morning. The other you may not be as familiar with, though it is a no less bullish play than the first stock.

Let's take a look…

Chris Johnson

About the Author

Browse Chris's articles | View Chris's research services

Chris Johnson is a quant - he's obsessed with building and perfecting mathematical models that allow him to predict, with startling accuracy, the direction of the markets, entire sectors, and individual securities. For the last year, he's been researching and building a new system that lets him move swiftly in and out of the hottest stocks in the market for life-changing gains - entirely on his own terms. The results of his newly-minted Night Trader system are nothing short of amazing.

Chris also contributes to Money Morning as the Quant Analysis Specialist.

… Read full bio