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Earnings Season Quantified
Market Indicator for the Week Ahead



Earnings Season during April Provides Guideline for May

579 Companies Reported Earnings in April


by Ian Harvey

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earnings

May 07, 2012

Introduction

We're now about half way through the April/May earnings season. Looking at optionable, liquid stocks, there were 579 companies that reported earnings in April. Below is a chart showing the average stock returns on the day of each company's earnings release (or the next trading day, if they reported after hours). It shows data for each month going back to 2011. April was a pretty quiet month compared to many others in the not-so-distant past, as stocks averaged a slight loss of about 0.01% on the day of their earnings.

This article takes a look at the earnings returns from previous years during the April/May earnings season, and gives an insight as to whether April can tell us anything about what may lie in store for May. Also, stocks that have typically jumped -- or slumped -- on the heels of their quarterly reports are highlighted – and then a few potential earnings-related plays for May are provided.

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Past April/May Returns

Below are a couple of tables showing how stocks have performed post-earnings during the months of April and May since 2006. The table on the left shows the average stock return, and the table on the right shows the percentage of stocks that were up on earnings. While the past two Mays show stocks averaging a loss on earnings, 2012 was the first April in the table to do so. The low percentage of positive returns for stocks the last two Mays highlight how poor those months were for stocks. In May 2011, stocks were up only 42.6% of the time on earnings, and in May 2010, only 31.5% of the time. Hopefully, this trend will change this month.

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Individual Stocks in the Earnings Season

Investors are always looking for individual stock plays – so what is available in the week ahead? Below is a list of interesting stocks which report earnings this week. They are all liquid and optionable, and have at least five years' worth of earnings data. This first set of tables shows bullish stocks. The table on the left is stocks with the best average return, and the table on the right is stocks with the highest percentage of positive earnings-day returns. Priceline.com (PCLN) tops both lists.

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Bearish Reactions during Earnings Season

Finally, these last two tables show stocks which have a history of bearish earning reactions. These tables show stocks with the biggest average loss on their report day and the lowest percentage of positive returns.

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