Make no mistake about it, Biotech has been hot. More specifically, the Biomedical/Genetics industry is in the top 32% of our Zacks Industry Rank. The industry has 38 stocks that are Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy). Among the top ranked stocks in this highly ranked industry is our Bull of the Day, Myriad Genetics (Nasdaq:MYGN-Free Report).
Myriad is a Zacks Rank #1 (Strong Buy) with earnings coming up after the close on May 6th. Myriad uses a gene-based medicine to develop therapeutic and molecular diagnostic products. Think medicine that is programmed specifically to your personal gene mix. That's what the long term goal is of Myriad. MYGN hopes that gene-specific medication will lead to more effective treatment of illness and disease.
The more you think about potential of these drugs the more excited you get about the stock. But this company is much more than just the story. MYGN has the numbers behind it as well. Not only has the company surprised earnings to the upside four quarters in a row, it's also had substantial upside revisions over the last 90 days. Current year consensus has risen from $1.98 to $2.21 and next year's numbers have risen from $1.71 to $1.92.
I came up with an interesting theory on how to find stocks I should probably avoid buying. I'll take the screen that I use to find potentially high flying momentum stocks and flip it on its head, keeping one key part of the screen.
So rather than look for Zacks Rank #1 (Strong Buy) stocks that have recently surprised to the upside and are outperforming the market, I decided I'd look for Zacks Rank #5 (Strong Sell) stocks that have recently disappointed to the downside and are underperforming the market. The one similarity between the two is I kept the part about the stock trading close to its 52-week high. I figured this way I could find stocks with the most to lose, or stocks where traders aren't looking at the earnings picture yet. With this as my logic, I ran the screen and found 5 stocks. But the stock with the chart I'd be most afraid to be long is Granite Construction (NYSE:GVA-Free Report).
When looking for potential mines in the field, I look to the price and consensus as well. If I see a stock going up and to the right while earnings are going down to the right, that tells me there could be trouble on the horizon. The price and consensus for GVA shows just that. It makes sense given current year consensus has dropped from $2.09 to $1.84 and next year from $3.18 to $2.71.
Will eBay (EBAY) Beat Earnings This Quarter?
eBay Inc. (Nasdaq:EBAY-Free Report) is set to report first-quarter 2014 results on Apr 29. Last quarter, it posted in-line results. Let's see how things are shaping up for this announcement.
Growth Factors This Past Quarter
eBay's strength at PayPal, fast-growing presence in the mobile space and reinvigorated Marketplaces business increased the sales growth rates in the fourth quarter of 2013. The continuous enhancement of the mobile shopping experience and rapid consumer adoption also contributed to the higher sales.
The sale of low-value items and increased expenditure on the product launches contained gross margin expansion in the last quarter.
For the first quarter, eBay expects revenues within the range of $4.150–$4.250 billion, which was short of consensus expectations of $4.30 billion. The company expects to generate a GAAP EPS of 51 to 53 cents and a non-GAAP EPS of 65 to 67 cents, better than the Zacks Consensus Estimate of 57 cents.
Our proven model does not conclusively show that eBay will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 57 cents. Hence, the difference is 0.00%.
Zacks Rank: eBay's Zacks Rank #3 (Hold) which when combined with a 0.00% ESP makes surprise prediction difficult.
We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stocks to Consider
You could consider other stocks with a positive earnings ESP and Zacks Rank #1, 2 or 3 such as:
North American Palladium Ltd. (AMEX:PAL-Free Report), with Earnings ESP of +33.33% and a Zacks Rank #1 (Strong Buy).
Salix Pharmaceuticals Ltd. (Nasdaq:SLXP-Free Report), with Earnings ESP of +29.27% and a Zacks Rank #1.
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