3 Predictions for the New Week

went out on a limb last week, and now it's time to see how that decision played out.

  • I predicted that Barnes & Noble  (NYSE: BKS  )  would move lower on the week. The meandering bookseller was set to report another quarterly loss on sliding sales, yet the stock was trading nicely higher for the year. It was a bad report, but Barnes & Noble's plans to spin off its Nook business electrified the bulls. The stock soared 13% on the news. I was wrong.
  • The Dow Jones Industrial Average  (DJINDICES: ^DJI  )  had been clobbering the Nasdaq Composite through April and early May, but it's been the other way around in recent weeks. My second prediction was for the Nasdaq to beat the Dow on the week. It happened. The Nasdaq Composite rose 0.7% on the week with the Dow declined 0.6%. I was right.
  • My final call was for Apollo Education Group  (NASDAQ: APOL  )  to beat Wall Street's income estimates in its latest quarter. The for-profit post-secondary educator behind the University of Phoenix online campus had beaten analyst targets consistently over the past four quarters, and I was banking on a repeat performance. We saw it close out the quarter with a profit of $0.76 a share. Analysts had been projecting net income of $0.66 a share. I was right.

Two out of three? I'll take it. I have now gone 16 for 18 over the past six weeks. 

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. Greenbrier will miss Wall Street's profit target
It builds railroad freight cars and marine barges to keep things moving, but the one thing that Greenbrier (NYSE: GBX  ) can't seem to do is move its quarterly profitability to the right side of analyst forecasts. 

Greenbrier has come up short on the bottom line in three of the past four quarters. Analysts see Greenbrier posting a profit of $0.74 a share when it reports on Wednesday. That'a big advance from the $0.50 a share it rang up a year earlier, but Greenbrier has missed more often than not over the past year, coming off back-to-back missed heading into this report. My first call is for Greenbrier to earn less than Wall Street is expecting.

2. The Dow will beat the Nasdaq this week
A big reason for my being right 16 out of 18 times over the past six weeks is that the tech-heavy Nasdaq Composite has beaten the Dow Jones Industrial Average in all six weeks. In a surprising twist given my respect for momentum, I'm going to switch sides this week. 

The Dow has been getting creamed by secondary stocks over the past month and change. Between general summer skittishness and the short trading week, my bet this time is that the 30 blue chip stocks making up the Dow will reign supreme after a long drought. My second call is for the Dow Jones Industrial Average to beat the Nasdaq Composite for the week.

3. Paychex will beat Wall Street's earnings estimates
Some stocks are just flat-out better than others. Paychex  (NASDAQ: PAYX  ) is a leading provider of payroll, human resources, and other related services. Paychex offers small- and medium-sized companies the freedom to outsource mundane operations so that they can focus on the business.

Another thing it does is make analysts look like perpetual underachievers. If analysts say the company rang up a profit of $0.40 a share in its latest quarter, I'll argue that it held up better than that. 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

Q4 2013

$0.38

$0.38

0%

Q1 2014

$0.43

$0.44

2%

Q2 2014

$0.42

$0.43

2%

Q3 2014

$0.42

$0.44

5%

Source: Thomson Reuters.

Things can change, of course. Corporate America hasn't been at its best lately, and Paychex is always under assault from nimble tech upstarts that are hungry for new business.

That's all stuff to keep in mind down the road, but not now. Everything seems to be falling into place for another market-thumping quarter on the bottom line.

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  • Report this Comment On July 02, 2014, at 5:03 PM, johare88 wrote:

    You are making such a bad prediction. Guess you did not perform dd on gbx. Suggest that you perform enough research or at least basic research in future before making any prediction. I am grad that I didn't take your suggestions because I examine orders the gbx has.

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