Wall Street heads into the second-quarter earnings season this week, but really cranks into gear next week when 68 of the S&P 500’s blue-chip stocks will provide their quarterly results and guidance.
For many companies, these reports will come and go with little movement — often times, Wall Street prices in results well ahead of time, and many companies provide reports that show little more than the status quo.
Those aren’t the stocks we’re interested in.
We’ve recently identified about 20 blue-chip stocks that are on the earnings “bubble.” These are companies that must at least meet (but ideally beat) analyst expectations on the top and bottom lines, and in guidance, to avoid heavy selling and potentially breaking into serious bear market trends.
Of our 20 bubble stocks, the following seven have been scored as having the highest risk heading into earnings. If you hold any of these, you’ll want to watch their upcoming reports like a hawk. Read on as we identify the stocks, and just how much potential danger they’re in.
Blue-Chip Stocks With High-Risk Earnings Reports: Apple (AAPL)
Scheduled to Report: Tuesday, Aug. 1 (PM)
Earnings Estimate: $1.57 per share
Revenue Estimate: $44.92 billion
Apple Inc. (NASDAQ:AAPL) stock is trading more than 25% higher for the year on anticipation of yet another iPhone iteration, but the market is starting to show signs of worry – of possible delays, that the iPhone froth grew too much, and perhaps looking even farther ahead to what exactly is next once the iPhone 8 comes and goes.
The past few quarters have delivered signs that the once impervious phone sales were starting to crack under pressure from other offerings. That, along with Microsoft Corporation (NASDAQ:MSFT) and other companies’ increasing gouging of iPad business, is notable.
Apple is showing a little strength of late, but is essentially flat since May while the market has traded to new highs. This means scores of traders will be putting an emphasis on the upcoming results.
With 78% of the analysts tracking AAPL stock ranking it a buy, there will be significant pressure from downgrades on anything other than a stellar report.
Blue-Chip Stocks With High-Risk Earnings Reports: AT&T (T)
Scheduled to Report: Tuesday, July 25 (PM)
Earnings Estimate: 74 cents per share
Revenue Estimate: $39.88 billion
Telecom giant AT&T Inc. (NYSE:T) has been working hard to diversify its earnings streams as the wireless business has seen shrinking margins and increased competition. The acquisition of DirecTV was a move in the right media direction, and Time Warner Inc. (NYSE:TWX) is soon to go through.
But more work must be done.
Rising interest rates are taking a large crowd of dividend-seeking investors out of AT&T stock, which puts more pressure on the performance of the company to maintain current values.
Our technical models see AT&T shares rated bearishly in the intermediate-term, which will either continue or worsen without a great earnings report in a couple weeks.
Blue-Chip Stocks With High-Risk Earnings Reports: Verizon (VZ)
Scheduled to Report: Thursday, July 27 (AM)
Earnings Estimate: 95 cents per share
Revenue Estimate: $29.89 billion
Like AT&T, Verizon Communications Inc. (NYSE:VZ) is seeing increasing competition in their once almost monopolized space. In an additional twist, the media space that companies like Verizon and AT&T were naturally migrating to have already become crowded with competition.
Dividend investors were happy to hold shares of Verizon based on the healthy yields when rates were low, but now investors are migrating away from these companies as Janet Yellen suggests we’re going to continue to see rates move higher.
And I’m skeptical of Verizon’s “Oath” — the subsidiary made up of acquisitions AOL and Yahoo! — doing much to change the narrative.
Technically, Verizon is an intermediate-term bear based on the chart — something that will only change with a shake-up from unexpectedly outstanding earnings just a couple days after AT&T provides its report.
Blue-Chip Stocks With High-Risk Earnings Reports: Intel (INTC)
Scheduled to Report: Thursday, July 27 (PM)
Earnings Estimate: 68 cents per share
Revenue Estimate: $14.41 billion
The semiconductor industry has been leading the market higher … even though one of the largest companies in the space has been underperforming by a ton.
This quarter, Intel heads into its Q2 earnings report after having transitioned into a technical bear market over the past two weeks. This will put additional pressure on INTC shares unless the chipmaker is able to provide a blowout quarter.
The question on everyone’s mind is: What on earth would drive it?
Intel’s 20-month moving average is sitting at $33. This is the line between a long-term bull and bear market. A good second-quarter showing may save Intel from falling into a bear market, which means this late July report is a critical.
Blue-Chip Stocks With High-Risk Earnings Reports: Netflix (NFLX)
Scheduled to Report: Monday, July 17 (PM)
Earnings Estimate: 16 cents per share
Revenue Estimate: $2.76 billion
Netflix, Inc. (NASDAQ:NFLX) is actually creeping right up on us, with its report due out Monday after the close.
Every quarter, the market expects the streaming leader to trip, stumble or fall through their report, especially in the subscriber growth matrix. The past two quarters saw NFLX stock rally into its earnings similar to this quarter, which raises some concerns, because this usually results in a post-earnings “sell the news” event.
This quarter, Netflix shares have been tracking sideways, putting the stock in a technical testing ground. Trading just above its 50-day moving average, NFLX is now at risk of seeing real technical selling if its results fail to impress.
Right now, we’re actually bullish on Netflix, because both the charts and sentiment suggest that shares will trend higher over the next six months. But without an impressive report early next week, NFLX could be hit with a real bout of downside volatility.
Blue-Chip Stocks With High-Risk Earnings Reports: Garmin (GRMN)
Scheduled to Report: Wednesday, Aug. 2 (AM)
Earnings Estimate: 81 cents per share
Revenue Estimate: $806.53 million
Garmin Ltd. (NASDAQ:GRMN) has been reinventing itself for the past two years, fighting off others in the GPS space as it expands into smartwatches and other devices.
You wouldn’t know it if you’re a shareholder — GRMN is essentially trading where it was back in 2013, and more recently it has been rangebound for about six months.
The good news? Expectations for Garmin’s report are low, making a beat more feasible. The bad news? People examining the stock don’t like what they see. Analyst recommendations are pessimistic, and short interest is sitting at about 14% of the float — fairly high.
A positive report could cause the bearish crowd to turn tail and force the shorts to start buying back stock. (In fact, that’s one of our favorite contrarian plays.) However, the risk is high here, and a poor report will confirm what the bears suspect, sending GRMN below its range and giving way to much lower prices.
Blue-Chip Stocks With High-Risk Earnings Reports: Citigroup (C)
Scheduled to Report: Friday, July 14 (AM)
Earnings Estimate: $1.21 per share
Revenue Estimate: $17.37 billion
Last up is a financial stock, which means you’ll have to look quick, because they’re first up to report.
The financials are in the spotlight this earnings season, but Citigroup Inc (NYSE:C) — which reports July 14, so very soon — will be more closely watched from our perspective.
From a technical perspective, Citigroup has rallied strongly ahead of the report, which puts the stock at risk for profit-taking unless the company blows expectations out of the water.
Last quarter, the company posted 3% year-over-year growth after a year of shrinkage on the top line. Analysts expect the top line to decline 1%, and anything worse than that will stunt this bank stock’s rally of the past couple months. Should Citi really disappoint, expect a pullback to support around $62-$63.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.