3 Predictions for Next Week
I went out on a limb last week, and now it's time to see how that decision played out.
I predicted that Noodles & Co. would close lower on the week. After seeing the fresh IPO more than double and command a $1.3 billion market cap far sooner than its fundamentals should allow, I figured it would be in for reality check. A negative Barron's piece kicked off the week in the seemingly appropriate bearish tone, but the shares did start to claw their way back later in the week. It wasn't enough. The shares fell 3% on the week. I was right.
I predicted that the tech-heavy Nasdaq would outperform the Dow Jones Industrial Average. . This has been a tricky call lately, so how did it play out this time? Well, the market closed nicely higher this week. The Nasdaq moved 3.5% higher, and the Dow managed to close just 2.2% higher. I was right.
My final call was for Peregrine Pharmaceuticals to beat Wall Street's income estimates in its latest quarter. The upstart biotech tackling cancer through monoclonal antibodies has been posting blowout quarterly results over the past year, and I was banking on seeing the trend continue. Analysts were looking for a loss of $0.06 a share during the quarter, and it came through with exactly that. It wasn't a beat, though, so I was wrong.
Two out of three? I can do better than that.
Let me once again whip out my trusty, dusty, and occasionally accurate crystal ball to make three calls that may play out over the next few trading days.
1. Intuitive Surgical will close higher on the week
One of the more intriguing companies reporting this week will be Intuitive Surgical . The company behind the da Vinci surgical robotics system took a hit a few days ago, after revealing soft sales in its latest quarter. Posting revenue and earnings growth in the single digits is not the norm for Intuitive Surgical, and the news even included a decline in the sale of the actual systems.
With the bad news out of the way, Thursday's earnings call may be a time for healing. Intuitive Surgical can redirect attention to its favorable 18% increase in instruments and accessories, proving that the da Vinci systems that are out there continue to be used with growing regularity.
My first call is for Intuitive Surgical to close higher on the week.
2.The Nasdaq Composite will beat the Dow this week
Tech has been a big winner in recent years, so betting on tech over stodgy blue chips has been a good bet for me more often than not.
I'm going to stick with this pick. Most of the names in the composite are just too cheap at this point, and tech should be what carries us through the economic recovery. The market is ripe for the tech-stacked secondary stocks to continue to outpace the 30 megacaps that make up the Dow Jones Industrial Average.
3. CSX will beat Wall Street's earnings estimates
Some stocks are just flat-out better than others.
CSX has been working on the railroad, all the live long day. The provider of rail, intermodal, and rail-to-truck transportation services has been at this for 185 years. It knows what it's doing.
Another thing it does is make analysts look like perpetual underachievers. If analysts say the company posted a profit of $0.47 a share in its latest quarter, I'll argue that it held up better than that. History's on my side!
One of my best tricks to beating the market is finding stocks that perpetually land ahead of the prognosticators. Let's go over the past year of earnings reports.
Quarter | EPS Estimate | EPS | Surprise |
|---|---|---|---|
Q2 2012 | $0.47 | $0.49 | 4% |
Q3 2012 | $0.43 | $0.44 | 2% |
Q4 2012 | $0.39 | $0.40 | 3% |
Q1 2013 | $0.40 | $0.45 | 13% |
Source: Thomson Reuters.
Things can change, of course.
Analysts are holding out for flatting results, projecting marginal revenue growth and a slight dip in profitability. Rail is cyclical. Even though analysts also thought CSX would earn $0.47 a share during last year's second quarter -- and it clocked in just ahead of that -- it's no guarantee that history will repeat.
However, it's hard to argue against the trend. Everything seems to be falling into place for another market-thumping quarter on the bottom line.
Three for the road
Well, there are three predictions right there. Let's see how I fare this week.
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The article 3 Predictions for Next Week originally appeared on Fool.com.
Longtime Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Intuitive Surgical. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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