Will This Be The Week Investors Pay Attention To Earnings?

October 17, 2008
Cassie Slane

With a number of economic reports out of the way for now and the credit crisis in wait-and see-mode, investors will be able to focus their attention on corporate earnings. Analysts and investors will be paying closer attention to corporate guidance as opposed to results as the playing field quickly changes for companies.

As a result, analysts may have to pare down their estimates as most companies will likely to warn of tougher times ahead due to slowing consumer and business spending and tighter credit conditions.

SanDisk Corp.
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PowerRating) is due to post its third-quarter results after the close Monday, and analysts polled by Thomson Reuters are expecting the company to report a loss of $0.27 per share, compared with a profit of $0.54 a year ago, on revenue of $778.1 million. The flash memory maker reported a loss last quarter due to lower sales from “the rapid deterioration in consumer confidence.”

If you want to play this stock going into earnings, here are a few tips: Shorts may want to get out if the stock beats the Street before the next regular session opens as SanDisk has a near-term trend of widening its moves in the next regular session following an after-hours earnings release, doing so in three of the last four quarters. Longs may want to get out if the stock sinks in after-hours trading.

Texas Instruments Inc.
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PowerRating) is another stock that likes to widen its extended hours move. The chip maker is also set to report results after the close on Monday, and analysts expect earnings of $0.44 per share, compared with $0.52 per share a year ago, on revenue of $3.4 billion. The near-term pattern strongly favors a widening pattern, with share moves expanded in the last four consecutive quarters. On July 21, Texas Instruments beat on earnings but missed on revenues. Shares slid 11% in after-hours trading and extended their decline the following day, ending lower by 14.6%.

Apple Inc., on the other hand, firmly favors a narrowing trend, cutting back its evening performance in next day trade in the last six consecutive quarters. If the stock takes off in after-hours trading, longs may want to take their profit before the following regular session.

Apple is expected to report fourth-quarter earnings of $1.11 per share, up from $1.01 per share a year ago, on revenue of $8.05 billion. On July 21, Apple’s third-quarter results beat the Street but guidance for the fourth-quarter fell below estimates. Shares slid 10.7% in after-hours trading but regained some of that loss the following regular session, ending down 2.6%.

Cassie Slane is a Senior Editor at www.MidnightTrader.com.

Will This Be The Week Investors Pay Attention To Earnings?

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