3 Predictions for This Week

I went out on a limb last week and came out with mixed results.

  • I predicted that Acuity Brands (NYSE: AYI  ) would come up short in its latest quarter. The lighting specialist had earned less than analysts were expecting in three of its four previous quarters. Not quite. It was a "lights out" quarter for Acuity -- in a good way -- and its profit of $0.74 a share beat the $0.67 a share that the pros were projecting. I was wrong.
  • I predicted that the tech-heavy Nasdaq would outperform the Dow Jones Industrial Average (INDEX: ^DJI  ) . With the Consumer Electronics Show allowing gadgetry makers a shot to get investors excited about devices that will hit the market later this year, I figured it would be a good time to be riding tech. I was right.
  • My final call was for Lennar (NYSE: LEN  ) to blow past analyst bottom-line estimates the way the homebuilder has over the past year. Well, that streak came to a close. Lennar's quarterly profit of $0.16 a share was just short of the $0.17 a share that the pros were forecasting. I was wrong.

One out of three? I know that I can do better than that.

Let me once again whip out my trusty, dusty, and occasionally accurate crystal ball to make three calls that may play out over the next few trading days.

1. Google will beat analyst profit targets
Google (Nasdaq: GOOG  ) is too cool to play the Wall Street game. The world's largest online company doesn't put out guidance. Sure, it typically lands ahead of where the pros are perched, but when it misses -- as it did three quarters ago -- it can simply shrug off the performance.

It wasn't its miss, after all.

However, clearly the market values Google based on what it believes Big G will earn in the future. We can't ignore that. We also can't ignore that Google still usually does beat out these forecasts.

Wall Street figures Google's profits grew nearly 20% to $10.46 a share in its latest quarter. When it reports on Thursday, my call is that it will earn more than that. Despite recent distractions at Google, operationally there's no reason to believe that it's not growing its online-advertising business on reasonable margins. Yes, Google has been known to go on hiring sprees or support costly initiatives, but the dot-com darling also knows that it has to keep investors and analysts happy.

I sense another victory out of Google.

2. The Nasdaq Composite will once again beat the Dow this week 
I'm not trying to cling to my one correct call last week as a nostalgic grab at glory. This is January, folks. Investors tend to gravitate to dynamic growth stocks this time of year. There are a few speedsters among the 30 stocks in the Dow, but not enough for my taste.

I'm going to call for a repeat of my call from last week, arguing that the tech-stacked Nasdaq Composite will perform better than the Dow.

3. IBM will beat Wall Street's earnings estimates
Big Blue isn't just about computers and typewriters anymore. Over the years, the tech bellwether has managed to expand into the higher-margin niche of business services. Providing enterprise solutions and corporate consulting can be a pretty sweet gig.

Another thing IBM (NYSE: IBM  ) has done well is consistently land ahead of the pros. You have to back nearly five years to find the last time Big Blue has not beaten the prognosticators.

If analysts say the company earned $4.62 a share in its latest quarter, I'll whip out a "greater than" sign. History's on my side!

One of my best tricks to beating the market is finding stocks that perpetually land ahead of the prognosticators. Let's go over the past year of earnings reports.

Quarter

EPS Estimate

EPS

Surprise

Q3 2011 $3.22 $3.28 2%
Q2 2011 $3.03 $3.09 2%
Q1 2011 $2.30 $2.41 5%
Q4 2010 $4.08 $4.18 3%

Source: Thomson Reuters.

Everything seems to be falling in place for another strong quarter out of IBM on the bottom line.

Well, that's three predictions right there. Let's see how I fare this week.

If you like to stay on top of what happens next -- and I'm guessing you do, because you're reading this article -- how about checking out Motley Fool's top stock for 2012? It's a free report, but only for a limited time, so check it out now.

The Motley Fool owns shares of IBM and Google. Motley Fool newsletter services have recommended buying shares of Google. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Longtime Fool contributor Rick Munarriz calls them as he sees them. He owns no shares in any of the stocks in this story and is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Motley Fool has a disclosure policy.


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