by Ian Harvey
IMPORTANT NOTE: There is no stop-loss or pre-determined sell price recommended – this is left to the discretion of the individual trader.
Wednesday, October 14, 2015
Four Put Trades – Goldman Sachs - Advanced Micro Devices Inc - Mattel Inc - Winnebago Industries Inc
**1. Goldman Sachs Group Inc (NYSE:GS)
**OPTION TRADE: Buy the GS Oct 2015 170.000 put (GS151030P00170000) at approximately $0.95. Sell price is left to your own judgment.
Goldman Sachs Group Inc (NYSE: GS), an investment banking giant, will announce its third quarter results before the market opens on Thursday morning. Goldman last quarter posted surprisingly strong adjusted earnings, thanks to rising demand for mergers and acquisition work: Revenue in its financial advisory business segment is up by 50% during the past six months. "We were pleased with our performance for the quarter," CEO Lloyd Blankfein said in July.
This quarter, expectations are for revenue to sink 9% lower to $7.6 billion, as earnings fall to $3.29 per share from $4.57 per share in the year-ago period.
**2. Advanced Micro Devices, Inc. (NASDAQ:AMD)
**OPTION TRADE: Buy the AMD Nov 2015 2.000 put (AMD151120P00002000) at approximately $0.20. Sell price is left to your own judgment.
Advanced Micro Devices, Inc. (NASDAQ: AMD), a global semiconductor company with facilities across the world, is expected to report third-quarter profit and revenue below average analysts' estimate, after the market close on Thursday. The company, which announced 500 job cuts earlier this month, has been struggling with weak demand for its chips used in personal computers as well as intense competition.
AMD has been shifting to gaming consoles and low-power servers, but progress has lagged Wall Street expectations due to intense competition from Intel Corp and newer companies.
**3. Mattel, Inc. (NASDAQ:MAT)
**OPTION TRADE: Buy the MAT Nov 2015 20.000 put (MAT151120P00020000) at approximately $0.50. Sell price is left to your own judgment.
Mattel, Inc. (NASDAQ: MAT), a toymaker, is expected to report a third-quarter profit below analysts' average estimate, after the market close on Thursday.
Mattel is in the middle of a turnaround as its Barbie dolls have fallen out of favor with young girls. The company, which is working to streamline its toys portfolio, is likely to increase spending on marketing and other promotions ahead of the holiday season, which could have weighed on profit in the quarter. Mattel is also struggling due to losing its contract for Disney Princess toys, which includes dolls based on the blockbuster Frozen franchise.
**4. Winnebago Industries, Inc. (NYSE:WGO)
**OPTION TRADE: Buy the WGO Nov 2015 19.000 put (WGO151120P00019000) at approximately $0.55. Sell price is left to your own judgment.
Winnebago Industries, Inc. (NYSE: WGO), the largest U.S. motor home maker, is expected to report a lower fourth-quarter profit on Thursday due to a drop in average selling prices.
The company has been selling more of its lower priced recreational vehicles, while facing lower demand for its top-end motorhomes. The company has also seen an increase in capital expenditure as it tries to cope with worker shortage at a key plant in rural Iowa and rectify problems related to sourcing key components from suppliers.
Tuesday, October 13, 2015
Intel Corporation (NASDAQ:INTC) Puts
**OPTION TRADE: Buy the INTC Nov 2015 30.000 put (INTC151120P00030000) at approximately $0.40. Sell price is left to your own judgment.
Intel Corporation (NASDAQ: INTC), a designer and manufacturer of integrated digital technology platforms, is expected to report its third-quarter results and offer financial guidance for its fourth and final quarter of the year after the market closes today.
Intel surprised Wall Street at the last quarterly check-in: It beat sales and profit estimates while projecting a less-bad year than analysts had been expecting. The chipmaker's official outlook now calls for sales to fall by just 1% this year, even as PC shipments shrink by 9%, according to the latest forecast from IDC. Growth in its data management and Internet of things divisions have picked up some of the slack from weak PC demand.
The expected headline numbers for this quarter's results are $14.2 billion of revenue and $0.59 per share in profit. Both figures are down from the prior year.
Weakness in the overall PC market, coupled with an inventory burn at Intel's customers ahead of the launches of both Microsoft's new Windows 10 operating system as well as Intel's new Skylake chips, led the company to have a relatively weak first half of 2015.
Going into the second half of 2015, Intel is expecting things to get better as PC vendors "refill" their inventories, which the company hopes will lead to a "better-than-seasonal" second half of the year. However, there are several factors that will not be working in Intel’s favor and are driving the relatively pessimistic analyst estimates:-
1. There is fear that PC sales will further deteriorate, posing risk to Intel's PC guidance.
2. There is concern over whether Intel will be able to deliver upon its revenue guidance of at least 15% growth from 2014 in its data center group, as enterprise server sales showed signs of weakness last quarter.
3. Expect Intel management to be light on the predictions during the call.
4. Insider selling by Krzanich Brian M, director officer (CEO) of Intel Corp, who has unloaded 35,000 shares at an average price of $$30.21 in a transaction dated on October 1, 2015. The total value of the transaction was worth $1,057,350.
Tuesday, October 13, 2015
J B Hunt Transport Services Inc (NASDAQ:JBHT) Calls
**OPTION TRADE: Buy the JBHT Nov 2015 80.000 call (JBHT151120C00080000) at approximately $0.50. Sell price is left to your own judgment.
J B Hunt Transport Services Inc (NASDAQ: JBHT), a holding company that is engaged in providing surface transportation, delivery and logistics services, is scheduled to issue its quarterly earnings data before the market opens on Wednesday, October 14th. Analysts expect the company to announce earnings of $0.97 per share for the quarter; and are likely to have a solid beat.
J B Hunt Transport Services is looking sound due to the enhanced equipment velocity, accelerated fleet conversion and branch expansion. The company's Intermodal segment is expected to show solid growth on strong fundamentals and highway-to-rail conversion, while the Dedicated Contract Service segment holds strong growth opportunities stemming from the growing popularity of final mile services. Additionally, J.B. Hunt focuses on growth of the ICS business unit, expansion of the eastern intermodal network and development of new and existing customer base.
At the present time there are ten analysts giving a buy rating and one has issued a strong buy rating to the stock. J B Hunt Transport Services has an average rating of “Buy” and a consensus target price of $94.06.
Tuesday, October 13, 2015
JPMorgan Chase & Co. (NYSE:JPM) Puts
**OPTION TRADE: Buy the JPM Nov 2015 60.000 put (JPM151120P00060000) at approximately $1.00. Sell price is left to your own judgment.
JPMorgan Chase & Co. (NYSE: JPM), the biggest U.S. bank by assets, is scheduled to post earnings per share (EPS) of $1.39 and revenue of $23.7 billion after the market closes today. Both earnings measures are expected to see a decline in the three-month period of 3QFY15 in comparison to 3QFY14.
The main concern for big banks ahead of 3Q earnings release continues to be the revenue generated from trading desks. A number of big banks along with analysts at Morgan Stanley have pointed out that Fixed Income, Currencies and Commodities (FICC) operations might see a decline in revenues. The overall industry is projected to see a 10-25% decline in revenue from the division. The research note by Morgan Stanley further suggests that JP Morgan Chase is likely to see a 17% decline.
Ahead of the earnings release, JP Morgan Chase has received sell-side updates from research firm Citigroup and Baird. Citigroup lowered its EPS estimates for the bank, while Baird recommends the stock as a top pick.
On the charts, JPM has moving steadily lower since topping out at a record high of $70.61 on July 23, down 12.7%. The stock is struggling to find a foothold atop its 320-day moving average. This trendline has served as both support and resistance for JPMorgan Chase & Co. since late August.
Currently, the stock is consolidating between $58.30 and $64.26 price levels. It is very probable that a break below $58.30 will see another correction downwards to $55.74, which may later extend further to $50.47.
Tuesday, October 13, 2015
CSX Corporation (NYSE:CSX) Puts
**OPTION TRADE: Buy the CSX Nov 2015 28.000 put (CSX151120P00028000) at approximately $0.90. Sell price is left to your own judgment.
CSX Corporation (NYSE: CSX), a transportation company, is set to release third-quarter 2015 results after market closes today. In the last quarter, the company posted a positive 5.66% earnings surprise – but it is not likely that this will occur for this earnings report.
Coal is a key revenue-generating commodity for railroad operators. Thus, a decline in domestic coal shipments hurts CSX Corp.'s operations to a considerable extent. Meanwhile, a strong U.S. dollar, lower fuel surcharges from customers owing to declining fuel costs and sluggish carload growth at the energy sector are likely to impact the company's top line.
CSX Corp. expects the backend of the year to be more challenging than the first half owing to intensifying coal headwinds. Further, the railroad operator has projected a decline of over $400 million in domestic coal revenues for 2015.
Moreover, railway carriers face intense competition from various transportation providers including railroads, motor carriers, barges and ships that operate along similar routes across its service area. Hence, low oil prices help these transport companies, especially the trucking companies, offer attractive rates to clients, thereby impacting the business of rail companies.
Monday, October 12, 2015
Monsanto Company (NYSE:MON) Calls
**OPTION TRADE: Buy the MON Nov 2015 95.000 call (MON151120C00095000) at approximately $0.50. Sell price is left to your own judgment.
Monsanto Company (NYSE: MON), a provider of agricultural products for farmers and the world’s largest seed supplier, is a company tied to the rising need for food.
The genetically modified seed supplier and chemical crop protection company holds the No. 1 market position in four of its five largest markets and is No. 2 in the fifth.
The company's products help farmers produce more per square acre and protect their crops from damage. If the world expects to increase crop yields and feed a booming global population, it will need Monsanto to do it.
Despite the slide in prices of agricultural commodities, shares of Monsanto continued to track higher until June of last year. That's when lower crop prices really started cutting into spending and U.S. dollar strength hit the company's foreign sales. Monsanto has booked declining year-over-year sales in three of the past five quarters.
In its most recent quarter, reported on Oct. 7, Monsanto posted a loss of $1.06 per share. Sales of $2.36 billion missed estimates by more than 10%. Management's full-year earnings guidance of between $5.10 and $5.60 per share was also below analysts' forecasts.
But in this weak environment, Monsanto is positioning itself to protect cash flow. The company announced a restructuring that would cut its labor force by 12% and yield $275 million to $3 million in annual savings over the next two years. The company also said it will accelerate its share repurchase program, buying back $3 billion in shares over the next six months.
Shares of Monsanto are nearly 30% off their 52-week high and are trading for just 16.8 times the midpoint of management's full-year earnings estimate. That represents a more than 30% discount to the five-year average multiple of 24.9.
The company generated $1.6 billion in free cash flow over the past four quarters without cutting capital spending. And it is on track to launch its next-generation Roundup Ready Xtend system which it expects to be a strong growth driver.
With global food demand rising and the need for crop yield drivers like the products sold by Monsanto, as well as management having already made the tough decisions necessary to protect cash flow and prioritize shareholder return, the stock move will be in an upward movement.
Monday, October 12, 2015
Cheniere Energy, Inc. (NYSEMKT:LNG) Calls
**OPTION TRADE: Buy the LNG Oct 2015 55.000 call (LNG151023C00055000) at approximately $0.30. Sell price is left to your own judgment.
Cheniere Energy, Inc. (NYSEMKT: LNG), an energy company engaged in Liquefied natural gas companies, is expected to touch $81.67 in the short term, and may be as high as $90.00 according to a price target that has been shared by 6 analysts.
Shares of Cheniere Energy, Inc appreciated by 11.84% during the last five trading days and 0.51% for the last 4 weeks. The shares have outperformed the S&P 500 by 1.72% in the past week but underperformed the index by 2.17% in the last 4 weeks. Year-to-Date the stock performance stands at -24.66%, which means, with improved upward movement, there is plenty of room to make back lost ground.
Activist investor, Carl Icahn increased his stake in Cheniere Energy for the third time in just over two months to 12.07% of total shares outstanding. Not only has he increased the stake in the company, but many institutional investors have also increased their exposure towards the company. Such a massive increase in Icahn’s exposure and institutional investors' consistent stakes in the company reveal that all are positive about the company’s performance in the future. About 379 institutional players have a stake in the company, amounting to 87.23% of the total outstanding shares in the last quarter.
There exists much potential in the company and its future appears to be good. The positives for the company include that it has contracts of gas supply for the next 1-7 years. It also has the capability to meet the contracts, which reflects higher cash flows in the future.
Like all other energy companies, the LNG Company also has debt; but it is quite manageable. The only debt due in FY16 is of $1.67 billion on 7.50% secured notes due in 2016. The rest of the debt is due in 2045, which means that the company would not have any problems in managing its debt whatsoever.
Research analysts at Seaport Global Securities restated Cheniere Energy‘s stock to ”accumulate” last Friday. They presently have a $68.00 target price on the stock. Seaport Global Securities’ price objective suggests a potential upside of 28.21% from the company’s previous close.
Also, in a research note released to investors, Credit Suisse assumed an “Outperform” rating on Cheniere Energy, Inc. and have a price target at $86 per share on the company.