Your First Trade of the New Earnings Season

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It’s finally here. Earnings season kicks off with Alcoa Inc. (NYSE: AA) on Monday, giving the market something to trade on after the June employment numbers left confounded traders feeling empty.

Though next week is the start of the season, the action really gets going the following week. Just 21 S&P 500 companies are on the schedule, though big names — Google Inc. (NASDAQ: GOOG), Intel Corporation (NASDAQ: INTC), General Electric Company (NYSE: GE), Citigroup Inc. (NYSE: C), among others — are plentiful.

Let’s look at a company that actually beats Alcoa to the punch by announcing before the open on Monday. It’s The Shaw Group Inc. (NYSE: SHAW), an engineering and construction company based in Baton Rouge. Business has been good for Shaw of late, with the company winning a number of private and government contracts within the past few weeks.

Analysts expect SHAW to post a slight decrease in profits from a year ago. The company has a spotty history of beating the consensus estimate. Over the past four years, the company has beat seven times, missed seven times, and met expectations twice. Not much to glean from those numbers, although SHAW’s recent success in winning contracts bodes well.

We also like SHAW’s chart, which shows the 200-day moving average supporting the shares three times in less than two months. The stock is currently rebounding from this trendline.

The other thing we like about SHAW is that the Street is aligned against the shares. With just 2 of 14 rating the stock a “buy,” we see huge room for future upgrades, especially if the company impresses with earnings on Monday.

SHAW has a lot going for it: It has a winning business, solid chart support, and could benefit from analysts jumping on the bandwagon. Before earnings hit, consider playing an August 34 or 35 call to give plenty of time for the post-earnings move to play out.


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Article printed from InvestorPlace Media, https://investorplace.com/2010/07/your-first-trade-of-the-new-earnings-season/.

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