Although we all need a game plan each and every day that we enter the market, it is especially important during earnings season. Trying to game earnings has buried many but has also rewarded the few who have mastered how to play them.

Unless you are the best of the best, we generally believe there is no reason to "game" earnings and try to capitalize on how you think the market will react to a particular release.

But if you do dare to play in these waters, we felt obligated to at least scour the environment and find five stocks you must avoid this week.

First on the list is Pilgrim's Pride (PPC). Investors should avoid this stock this week. The largest chicken company in the U.S. and second-largest in Mexico will report third-quarter results on Tuesday. Expectations for second-quarter earnings are low due to higher raw materials cost and low chicken prices. Pilgrim's Pride stock is down 52% on the year.

Moody's downgraded the company's credit rating to B1 from Ba3, citing that margins, cash flow and credit issues will "significantly erode" in 2008 because of the high feed prices. The rating is speculative grade, and the outlook on PPC remains stable. In 2008, feed costs will rise by more than $800 million.

Skinless boneless breast prices declined even further last week, down 3 cents to $1.50 per pound. Analysts believe that in order to set off the rising corn and soybean feed prices, chicken needs to be selling around the $2-per-pound level.

In an effort to battle the record high feed prices, Pilgrim's will cut 600 jobs at an Arkansas processing plant, representing nearly half of the work force. The company will also shut down a distribution center in El Paso, which employees about 34 people.

The company, based out of Pittsburg, Texas, has missed its last three earnings estimates. First-quarter estimates came up 188% short while second-quarter results missed the mark by 85%. Soaring animal feed prices and a weak chicken market should keep third-quarter results down as well.

Next on the list is Energizer Holdings (ENR). This is another stock to stay away from this week. The manufacturer of consumer products, including batteries, Schick products and Playtex products, will announce earnings for the third quarter on Wednesday.

After dismal second-quarter results, which missed expectations by 23%, and a consumer that's spending less, Wall Street is anticipating soft results from Energizer. Investors are still a little bit nervous after Chairman Emeritus Bill Stiritz suddenly retired last quarter. Battling Procter & Gamble's (PG) Gillette is another issue for Energizer, and it has seen a deceleration in organic sales growth.

In the second-quarter conference call, CEO Ward Klein cautioned investors: "The remainder of fiscal 2008 will be challenging." Unfavorable product costs at a rate of $8 million to $10 million per quarter are expected to continue for the third and fourth.

Energizer has missed its earnings goal the last three quarters, and the consumer hasn't changed much since then; if anything, it has gotten worse. Therefore, Energizer is more than likely to miss next week. The only good news is that Energizer is extremely cheap right now, and the long-term growth prospects remain very attractive.

This week also may be rough for Eastman Kodak (EK). The Rochester, N.Y.-based camera company has missed its earnings expectations for the past two quarters, the last one being the worst. Analysts were expecting a loss of 6 cents a share during the first quarter of 2008, but the company posted a loss of 39 cents a share, a decrease of 680%. Every business segment declined, especially the inkjet and digital camera units.

The company plans to announce second-quarter earnings this Thursday, but analysts and investors alike are expected poor results. Higher material costs will drive down profits in traditional film and commercial printing. Inkjet printers and digital cameras will continue to suffer as weak consumer demand and saturation will drive down sales.

Analysts at Cross Research and Deutsche Bank both have a sell rating on Eastman. Cross decreased its price target to $14, while Deutsche Bank dropped its target to $13.

Shares of Eastman Kodak, which are down by 30% on the year, have experienced a large amount of institutional selling recently. Fruth Investment Management sold its entire position in the company, and TD Banknorth and Nottinghill Investment Advisers significantly reduced their holdings.

Another one to avoid this week is Jones Soda (JSDA), which is also coming out with earnings. On Friday, Aug. 1, Seattle's soda company will report second-quarter earnings. Analysts are expecting a loss of 7 cents a share, but seeing as Jones Soda has missed expectations the past four quarters, the actual results could be much worse.

In the first-quarter conference call, the company warned investors that its growth will lead to more losses until next year.

Last quarter, the company was expecting a loss of 4 cents a share, but it reported a loss of 15 cents a share, a miss of 275%. The beverage has been experiencing problems as it grows from a small regional company to a national brand. These growing pains will show up in this period's earnings report, which is why investors should stay away.

A survey from Longbow Research shows negative trends-related demand for Jones Soda at the majority of major retail stores, such as Wal-Mart (WMT) and SuperValu subsidiary Albertsons.

Jones Soda recently made its interim CEO, Steve Jones, its permanent boss. Investors are hoping this former Coca-Cola executive can reverse the losses and transform the company into a national competitor.

And finally, another stock that could suffer this week is Centex (CTX). The Dallas-based homebuilder has come up short of its last four quarterly earnings estimates. With the housing market not at its bottom yet, Centex could be in store for another miserable quarter next week. So far, the stock has fallen 47% in 2008.

An industry report on existing home sales showed a 2.6% drop in June to 4.86 million, from 4.99 million in the previous month. Deutsche Bank recently lowered its price target on Centex to $20 from $25 to reflect its view that "the credit crisis has lowered the premium that investors are willing to pay for the underlying homebuilding assets."

Again, if you are going to play the earnings season, always have a disciplined plan.


A note from James Altucher:

Every weekend I send an email to Jim Cramer and several hedge fund managers about the most interesting portfolios posted on Stockpickr that week. Usually those portfolios not only list stocks according to a theme but also offer significant analysis as to why the stocks are cheap.

Here are some examples:

Stocks related to drilling the Marcellus Shale

MLPS with yields above 7%

Microcaps trading for less than tangible book

Stocks that do well after Hurricanes

Here's the challenge: Build a portfolio at Stockpickr.com with great analysis, and send me the link. Each great portfolio (with analysis) will get posted on TheStreet.com with your byline (as a "Stockpickr Guest Columnist") and will be included in my email I send to Jim and the other
hedge fund managers on my list.



At the time of publication, James Altucher had no positions in stocks mentioned.
Published July 28, 2008