It’s tempting to pursue stocks going into quarterly earnings with the hope that a big upside surprise and blockbuster beat will be served up. Of course, even a good number is not a guarantee that shares will start gaining after a number is revealed. And while it’s an important time of the year for firms as they step up to the plate, investors shouldn’t look to play quarters unless, of course, one is willing to add more to a position if the quarter comes up short and shares sag, or, even more confusing, if a good result is delivered, only to be met with a lack of reaction or even a bit of a dip.
At the end of the day, investors should insist on value and treat quarterly earnings results as a chance to double down should things come up short. Either way, I don’t think the quarter-to-quarter action should matter as much to investors who are fully committed to the long-term growth runway. In this piece, we’ll look at two names that might be a great value ahead of their quarters. Now, that’s not to say that they’ll surpass expectations up ahead. But, if they do, there’s really no gauging how the reaction will be.
Listen to management guidance
After all, far more than just the past quarter’s results can dictate the trajectory of a share price after a number is unveiled.
Most notably, management commentary and guidance could be even bigger than the actual results themselves. Not to mention that it all depends on how expectations are going into a quarter. A high bar and a narrow beat might be met with selling, while a low bar and a huge miss might be met with buying if the guide is good and management sounds upbeat about the quarter or full year ahead.
Without further ado, here is a name I’d watch or buy before the number and, if the number falls short and leads to a bit of a sell-off, after as well.
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Cameco
Cameco (TSX: CCO) is more than capable of an earnings surprise, in my opinion. And while the next reveal is a mystery, I do think that there’s an opportunity after the latest correction in shares of the premier uranium miner. The stock is down 24% from its high. It’s a bearish plunge, but one that could be worth watching, especially as the AI-driven nuclear renaissance narrative begins to cool a bit as investors take a bit of profit off the big gainers with their big multiples. Today, shares go for 92 times trailing price-to-earnings (P/E). Not exactly a cheap stock, even after a vicious decline into bear market territory.
Still, I think Cameco is making all the right moves. It has been making smart moves behind the scenes, including increasing its stake in Cigar Lake. And the flooding issues that may have weighed back in May are now in the rearview, at least for the most part, with production now back online. Despite the AI tailwinds, the big question mark lies in the price of admission. It’s becoming tough to justify the multiple, even after the latest drop. When you consider production targets at key mines, though, I do think there’s room for a surprise, especially now that the bar has been lowered quite a bit.
