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3 Earning Results that Could Lead to a Long-Term Trend Higher: The Home Depot, Inc. (HD) and More

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Earnings and earning-related news is the number one catalyst for stock movement. A strong quarter can dictate the direction of a stock for the following three months as can a bad quarter; in the past I have written in detail about such subjects, a domino effect following a strong or bad quarter. In this piece I am looking at three stocks that might see a long-term trend as a result of earnings.

Lumber Liquidators Holdings Inc (NYSE:LL) rallied higher by more than 3% after reporting earnings that easily exceeded expectations. The company grew its revenue by more than 20% year-over-year to $210.7 million, beating the consensus by almost $13 million. Its EPS of $0.50 was $0.07 better than expectations, which represents net income growth of 63.2% yoy. The company also improved gross margins and gave guidance that suggests yet another great year in 2013.

The Home Depot, Inc. (NYSE:HD)There are some who believe that LL is too expensive. The stock trades with a P/E ratio of 43.53, which is far more than competitor The Home Depot, Inc. (NYSE:HD) . Yet one thing to remember is that although LL is twice as expensive as The Home Depot (P/E ratio 23.78), Lumber Liquidators is growing sales by 20% and income by over 60%.

On the other hand, The Home Depot’s margins are near maxed, and it’s growing revenue by less than 5% yoy. Therefore, with Lumber Liquidators growing four times faster, it’s fair to suggest that it deserves double the valuation, and that it could continue to trade considerably higher.

The Medicines Company (NASDAQ:MDCO) has performed well over the last three months, and then saw another 5% boost on Wednesday after reporting earnings. The company easily surpassed expectations with revenue growth of 20.6%, and beat bottom line consensus by $0.27 with an EPS of $0.78.

The stock reached new 52-week highs on Wednesday and now is trading with a P/E ratio of 36.25 and a price/sales of 3.10, making it a fair value stock in the biotechnology space. Currently, investors had been looking forward to the approval of cangrelor, a product that produced positive results in a Phase 3 trial early last month.

In the quarter, international sales of Angiomax/Angiox grew nearly 80%, and for this reason, combined with new product launches, it is very likely that The Medicines Company will continue to trend higher.

Herbalife Ltd. (NYSE:HLF) is a very dangerous short-term trade at this very moment. The company continues to be at the center of controversy, and despite a very strong earnings report, the stock has traded lower by more than 4% on Wednesday.  The company beat on both the top and bottom line expectations, and raised its guidance for 2013. The company is now expecting sales growth in the range of 12%-14% in 2013, which is far above GDP.

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