Schaeffer's Trading Floor Blog

Earnings on Deck: Inc, Herbalife Ltd., and Sirius XM Holdings Inc.

Taking a closer look at SOHU, HLF, and SIRI ahead of their earnings results

by 7/25/2014 2:27 PM
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Wall Street has digested a slew of corporate earnings reports this week, and looking ahead to next week, quarterly results from Chinese Internet issue Inc (NASDAQ:SOHU), nutritional supplements specialist Herbalife Ltd. (NYSE:HLF), and satellite radio issue Sirius XM Holdings Inc. (NASDAQ:SIRI) will be in focus. Here's a quick look at this trio of names as earnings approach.

  • Barclays weighed in on SOHU ahead of Monday's early morning earnings report, expressing caution toward the company's margins with a $1 price-target cut to $78, but maintaining its "buy" recommendation on the equity. This "buy" rating defies the relatively skeptical tone the brokerage bunch has taken toward SOHU, with five "hold" or "sell" suggestions levied toward the security, versus two "strong buys." In today's session, the equity is 1% higher to trade at $56.71 -- thanks to an earnings-induced halo lift from sector peer Baidu Inc (ADR) (NASDAQ:BIDU) -- but could be poised to erase these gains in the wake of its own results. In fact, over the past eight quarters, Inc has averaged a single-session post-earnings loss of 2.5%, which widens to 2.9% when going out one week.

  • HLF is poised to finish the week up nearly 9%, after traders brushed off dire words of warning from activist investor Bill Ackman. Longer term, though, the equity is still off roughly 16% year-to-date -- yet the brokerage bunch remains decidedly optimistic. Specifically, four out of five covering analysts maintain a "strong buy" rating toward Herbalife Ltd., and the consensus 12-month price target of $85.50 stands at a 29% premium to the security's current perch at $66.12. Looking ahead to Monday evening's earnings report, Wall Street is calling for a profit of $1.57 per share for HLF's second quarter. Historically, the company has exceeded analysts' bottom-line estimates in each of the past eight quarters, resulting in an average single-session post-earnings advance of 0.3% for the stock.

  • Over the past eight quarters, SIRI has matched or exceeded consensus profit estimates five times, translating into an average gain of 1.4% in the subsequent session. When Sirius XM Holdings Inc. steps up to the earnings plate bright and early Tuesday morning, analysts are expecting the company to post a second-quarter profit of 2 cents per share. On the charts, the stock is sitting at $3.43 -- about 2% below its year-to-date breakeven level -- yet the consensus 12-month price target of $4.31 sits in territory not charted by SIRI since November 2006. Plus, seven out of nine covering analysts have rated the equity a "strong buy," with not a single "sell" to be found. Should SIRI buck its historical trend and turn in a poorly received report, a re-evaluation of ratings from this optimistic bunch could pressure the shares lower.

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