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 traded with a considerable amount of volatility. Then, I am determining if any might be attractive to “buy”.
Frontline Ltd (NYSE:FRO) is currently trading lower by 10% after reporting preliminary Q4 earnings. The company’s weakness goes beyond just top and bottom line performance, as its free cash flow declined 14% year-over-year (yoy) to just $137 million. The company has now said that it will reduce its fleet to save cash and to limit its exposure.
Investors are worried that because of such drastic cost-cutting measures the company will be unable to repay its $225 million convertible bond loan, which matures in April 2015. As of now, there are very few reasons to believe that the tanker market will recover, and if not the company could be looking to restructure its business. As a result, I can’t find any reasons to purchase the stock at this time.
Strong Earnings & Cautionary Guidance Equals Volatility
After trading higher by almost 4% in the premarket, Abercrombie & Fitch Co. (NYSE:ANF) has reversed to trade with a loss of nearly 7%. The company was in-line with top line expectations but blew past EPS expectations. However, flat comparable store sales and a less-than-stellar outlook for the upcoming quarter outweighed a strong quarter.
For the first time in years, the company increased its dividend, and by 14.3%. This is a stock that is very cheap compared to its fundamentals, and in my opinion, the weak guidance was more of a caution that poor performance is possible. The company has done a great job over the last year at turning its business around, and at these levels, I would buy.
Great Company But Possibly Too Expensive
Sourcefire, Inc. (NASDAQ:FIRE) announced earnings after the market closed on Thursday, and on Friday the stock rallied higher by more than 13.5%. The company was in-line on EPS but beat on the top line with growth of 27%. The company also issued upbeat guidance for the upcoming quarter and performed well in all measures of its business.