Options Trade – Foot Locker, Inc. (NYSE:FL) Calls 
Friday, November 21, 2014

**OPTIONS TRADE: Buy the FL Feb 2015 60.000 call (FL150220C00060000) at or under $1.50, good for the day. Place a protective stop loss at $0.60 and a pre-determined sell at $3.00.

by Ian Harvey

November 21, 2014

Introduction

Foot Locker, Inc. (NYSE: FL), an athletic apparel and footwear retailer, is scheduled to announce results of its third-quarter on November 21. The consensus estimate calls for earnings of $0.78 per share, up from $0.68 during the same period last year. The stock has gained 37.0% on the year, and is currently trading just shy of its all-time high.

Expect an upbeat quarterly report from Foot Locker. The retail sector in general has shifted more towards an athletic trend, which plays right into the hands of athletic apparel retailers such as Foot Locker. This was clearly seen in Nike's (NKE) recent strong earnings report, and it is believed that the same will hold true when Foot Locker releases the results of its most recent quarter. Foot Locker has a solid track record of posting better than expected results, and this trend should continue and possibly break past the Q3 report.

Technical Details

Foot Locker has a 52 week low of $35.81 and a 52 week high of $58.40. The stock’s 50-day moving average is $55.09 and its 200-day moving average is $51.72. The company has a market cap of $7.871 billion and a price-to-earnings ratio of 16.82.

Earnings

Foot Locker last posted its quarterly earnings results on Friday, August 22nd. The company reported $0.64 earnings per share for the quarter, beating the analysts’ consensus estimate of $0.54 by $0.10. The company had revenue of $1.64 billion for the quarter.

During the same quarter last year, the company posted $0.46 earnings per share. Foot Locker’s revenue was up 12.9% compared to the same quarter last year. Analysts expect that Foot Locker will post $3.44 EPS for the current fiscal year.

Driving Footlocker

The company’s performance so far this year has been impressive. The solid outcome resulted from effective implementation of the operational and financial initiatives. An improved top line consequently pulled up the bottom line, leading to better-than-expected results.

Management believes that by continually exploiting opportunities, like children’s business, shop-in-shop expansion in collaboration with its vendors, and enhancement of assortments, Foot Locker is likely to benefit in the long run. International expansion, especially Europe, is another growth catalyst.

Recently, Foot locker was in the news for CEO Ken Hicks surprise resignation. Hicks, in his 5-year tenure, has brilliantly transformed Foot locker into one coherent profitable unit. It is believed that the momentum achieved under his supervision will be duly carried forward by CEO designee, Richard Johnson, who himself is vastly experienced and has been supervising the company’s key strategic initiatives in his capacity as the COO.

In the trailing four quarters, the company has beaten the Consensus Estimate by an average of 8.5%.

Analysts Opinions

FBR Capital Markets initiated coverage on shares of Foot Locker in a research note released on Friday 7th November. The firm issued a market perform rating on the stock.

The company has also been the subject of a number of other research reports:-

• Analysts at Bank of America downgraded shares of Foot Locker from a buy rating to a neutral rating in a research note on Friday, September 26th.

• Separately, analysts at Piper Jaffray initiated coverage on shares of Foot Locker in a research note on Wednesday, September 17th. They set a neutral rating on the stock.

• Finally, analysts at JPMorgan Chase & Co. raised their price target on shares of Foot Locker from $51.00 to $60.00 in a research note on Monday, September 15th. They now have an overweight rating on the stock.

Foot Locker has been given an average recommendation of “Buy” by the fourteen ratings firms that are covering the company. Five research analysts have rated the stock with a hold recommendation and seven have issued a buy recommendation on the company. The average 1-year target price among brokerages that have covered the stock in the last year is $57.82.

Conclusion

The stock has been strong over the last twelve months, but it has stalled a bit since the end of summer, but with an upbeat report the stock is likely to finish the year on a positive note, possibly kicking off 2015 at an all-time high.

Therefore, based on the facts above the following options trade is recommended…..


**OPTIONS TRADE: Buy the FL Feb 2015 60.000 call (FL150220C00060000) at or under $1.50, good for the day. Place a protective stop loss at $0.60 and a pre-determined sell at $3.00.



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