Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

WebMD Health Corp. (WBMD), Wells Fargo & Co (WFC): Are These 4 Post-Earning Movers a Buy?

Earnings season has officially begun, and there were several companies that either reported earnings or provided preliminary earnings, which created a significant amount of stock movement. In this piece, I am looking at the most volatile of stocks on Friday, determining if any are a post-earnings buy.

Wells Fargo & Co (NYSE:WFC)

Solid Quarter, But Worthy of a Premium?

Wells Fargo & Co (NYSE:WFC) has the largest market capitalization of any bank in the U.S., and after earnings, the stock ticked higher by 1.55%. The company’s quarter was solid, as it beat on both the top and bottom line with flat revenue and a 14% rise in its EPS year-over-year.

What stuck out most to me was a decline in charge-offs. This decline reflects an improving credit quality for the bank. However, with both Bank of America Corp (NYSE:BAC) and Citigroup Inc (NYSE:C) trading below their book value per share and JPMorgan Chase & Co. (NYSE:JPM) creating double-digit revenue growth, it’s hard for me to pay a premium to invest in Wells Fargo & Co (NYSE:WFC).

Moreover, Wells Fargo & Co (NYSE:WFC) is the mortgage leader, controlling 22% of the market. To many, this might be a positive. But with uncertainty surrounding rates, and the company heavily dependent on this business, I think the stock’s premium is too much in an industry that is quite cheap.

Business Volume on the Decline

United Parcel Service, Inc. (NYSE:UPS) saw a decline of almost 6% on Friday after its preliminary earnings report. United Parcel Service, Inc. (NYSE:UPS) essentially issued a warning, lowering EPS guidance for Q2 and for the full year by about 10%. The company didn’t really jump into specifics, but did mention that package volume growth is slowing.

To me, the EPS is irrelevant compared to package volume, as EPS is a measure of efficiency while package volume notes operational strength. Sure, the industrial economy has been weak, and we all knew it, but volume is a metric that everyone believed was beginning to stabilize. As a result, at 1.59 times sales and 16 times future earnings, United Parcel Service, Inc. (NYSE:UPS) is slightly more expensive than the S&P 500. Thus, I’d seek value elsewhere.

Still Need More Proof?

WebMD Health Corp. (NASDAQ:WBMD) was the biggest gainer of the day, with a 25.63% pop after preliminary earnings. First, the company said it expects revenue between $124 and $125 million; the Street was expecting $115 million in Q2 sales. Then, WebMD Health Corp. (NASDAQ:WBMD) disclosed that it would earn $0.05 per share, which shows a significant gain from last year’s $0.11 loss.

Here’s the bottom line: After a year of fundamental loss, WebMD Health Corp. (NASDAQ:WBMD) is now growing and is improving its margins – Q2 guidance insinuates accelerated growth compared to Q1. At 2.75 times sales, WebMD Health Corp. (NASDAQ:WBMD) is surprisingly cheap in a very expensive web-based industry. While WebMD Health Corp. (NASDAQ:WBMD) does not produce the growth of a LinkedIn Corp (NYSE:LNKD) or Google Inc (NASDAQ:GOOG), its room for operational efficiency makes it interesting. With that said, I don’t know if this is a one-hit wonder or a sign of things to come. Thus, I still want to wait one more quarter for further proof that these improvements are here to stay.

Cheap Currency Leads to Analyst Shock!

For the last four months, analysts have been citing continued weakness for Infosys Ltd ADR (NYSE:INFY), and have all but guaranteed a cut in guidance from the outsourcing giant. To their surprise, Infosys beat earnings expectations with a 17.2% gain in revenue and net income growth of 3.7% year-over-year. Furthermore, the company reiterated full-year revenue growth of 6%-10%.

Infosys Ltd ADR (NYSE:INFY) rallied almost 5% on its earnings beat, and although encouraging, I can’t help but to realize that a falling rupee was in part responsible for its performance. The rupee is the company’s primary currency, and its fall has lowered costs. This might explain the distinction between it and competitor Accenture Plc (NYSE:ACN)’s recent revenue miss (and guidance cut).

Overall, I still think this is a challenging space, and if you were lucky enough to ride the stock 12% higher over the last week, then I believe it may be wise to take profits.

Final Thoughts

Well, Friday didn’t quite present the value I sought, but no fear, we still have six good weeks of earnings season remaining.

This last week was just the calm before the storm, as next week we will see significantly more earnings intensity, and what’s sure to be a significant amount of value presented.

As this earnings season progresses, I will use the Motley Fool’s CAPs to track my selections, just like last quarter, and hopefully we’ll be able to find value worthy of an investment.

Brian Nichols has no position in any stocks mentioned. The Motley Fool recommends United Parcel Service and Wells Fargo. The Motley Fool owns shares of Wells Fargo. Brian is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Are These 4 Post-Earning Movers a Buy? originally appeared on is written by Brian Nichols.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.