Monday, April 30, 2007

EMR and NMX for Monday

I like Emerson Electric (EMR) going into Tuesday morning's report. Like last Friday, I wanted to find a company with a history of earnings success, and Emerson fit this mold. The company has beaten the estimates each of the last six quarters and averaged a next day gain of almost three percent. The company's P/E of 20.46 is only slightly above the industry's standard, giving the stock some downside support should the company miss estimates. Also, Earnings Whispers projects that the company will beat the street by three cents.

It's important to note two dangers of the stock. The first is that the stock is trading a little bit below its 52 week high. I argue that many stocks have hovered around their 52 week highs going into earnings, and these stocks were able to explode past these technical barriers. My second concern is the sell-off going into earnings. Many stocks do sell-off going into earnings and I feel that investors are simply being risk-adverse and are not willing to take on the risk that comes with an earnings announcement.

As I mentioned in an earlier post, I also like NMX today.

Good luck!

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