Jelly Roll Capital Equity Research

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Quick Recap of Earnings Season

With earnings season progressing and more companies announcing results for Q1 2007, now seems like a good time to go over some of the more interesting and unexpected occurrences we have seen so far.

Leading off with a few of our favorite stocks: Aspreva Pharmaceuticals (ASPV, Aspreva Stock Report) has not officially announced results, but the company did preannounce that it believes it will beat on the top line, with about $59 million in revenues against $54 million expected. Because Aspreva maintains 100% gross margins, this should also translate nicely to the bottom line. Aspreva officially announces earnings May 2nd.

Despite our original high hopes for Builders FirstSource (BLDR, Builders FirstSource Stock Report), it became apparent to us over the weekend that the odds were against the company beating estimates. The company fell short of expectations on revenues and net income, although cash flows did surpass my original estimate. The stock traded down about 4% today, but I am optimistic that this is only a temporary setback for the stock.

There has been no earnings news from either Headwaters (HW, Headwaters Stock Report) or Alliance Resource (ARLP, Alliance Resource Stock Report), although Headwaters is scheduled to report May 1st.

Hard drive maker Western Digital (WDC) reported earlier this evening and beat estimates, with the stock moving nicely higher in the last two weeks. It seems like the troubles that competitor Seagate (STX) is facing are company-specific, as I speculated in this Seeking Alpha article.

Coach (COH) beat by a penny, but the results weren’t enough to move the stock higher, and it dropped 6% the following trading day. This appears to be a classic case of the stock getting too far ahead of the company. COH is up less than 2% since our assessment as it being overvalued, compared to 6% for the S&P.

Johnson & Johnson (JNJ) handily beat the low expectations it faced going into earnings, with EPS coming in 10% above expectations. JNJ is up over 8% in the last month, and I think the stock has plenty of room to move higher.