Profit From A Steady Flow Of Earnings In The Week Ahead!
by Ian Harvey
September 04, 2017
Profit From A Steady Flow Of Earnings
In The Week Ahead!
Earnings predictions for the week beginning September 04, 2017 -- continue to profit from a steady flow of earnings!
It was a slow start for the market in the past week as attention was focused on Hurricane Harvey. However, the markets provided a solid week for U.S. stocks, with the Dow, S&P, and Nasdaq all closing higher - despite the devastating storm and re-emerging tensions with North Korea.
The black spot for the week was Friday’s job report – with the U.S. economy only creating 156,000 jobs in August compared to the economists expected numbers of 180,000, while the unemployment rate edged higher to 4.4 percent.
This miss had little effect on the markets moving higher on Friday – which may prove a pre-cursor for a further stock rally through September.
Looking at the overall results for the major indexes for the past week:
Even though the earnings season is starting to come to a close, there was still plenty of action from retail stocks. Genesco and Dollar General stock took a hit, with Genesco hitting a seven-year low after missing earnings. Finish Line also fell after a profit warning, but thankfully, Lululemon managed to show strong earnings on Friday, much to the pleasure of Stock Options Made Easy members.
On the economic side of things, the holiday-shortened week will be a slower one after a rush of month-end data on July and August ahead of the holiday.
Earnings of interest in the coming week will be Kroger (KR), Barnes & Noble (BKS), Donaldson Co. (DCI), Restoration Hardware (RH), Dave & Buster's Entertainment, Inc. (PLAY), Finisar Corporation (FNSR), Fred's, Inc. (FRED)and HP Enterprise (HPE).
Options Trades to Consider Based on Expected Earnings Reports:
Tuesday, September 05
Dave & Buster's Entertainment, Inc. (NASDAQ:PLAY) - - shares have outpaced the industry over the past year. The company’s unique business model with increased dependence on gaming sets it apart and it is expected that the company’s entertainment business will carry the growth story forward.
Consistent efforts to build sales and improve margins through various initiatives have also been key growth drivers. In this regard, continual opening of stores, menu innovation, launch of games, and the Fun American New Gourmet and beverage options are expected to continue boosting its top and bottom lines.
The first quarter of fiscal 2017 marked the tenth successive earnings beat for the company. Estimates too have been going slightly up ahead of its fiscal second quarter earnings release.
Option trade to consider: Buy the PLAY OCT 20 2017 60.000 CALL at approximately $2.40.
Wednesday, September 06
RH (NYSE:RH)(Restoration Hardware)-- Analysts forecast earnings of $0.47 per share, up from $0.44 during the same period last year, on revenue of $612.71 million and the Earnings Whisper number is $0.49 per share. The stock has been a top performer during the year, but shares are currently in a downward trend. Despite the recent losses, the stock is still up 48.3% year to date.
Consensus estimates are for year-over-year earnings growth of 23.68% with revenue increasing by 12.76%. Short interest has decreased by 28.4% since the company's last earnings release while the stock has drifted higher by 9.8% from its open following the earnings release to be 9.0% above its 200 day moving average of $44.51. Overall earnings estimates have been revised higher since the company's last earnings release.
Option trade to consider: Buy the RH OCT 20 2017 50.000 CALL at approximately $3.40.
Thursday, September 07
Finisar Corporation (NASDAQ:FNSR) - The consensus earnings estimate is $0.40 per share on revenue of $341.91 million and the Earnings Whisper number is $0.42 per share. Consensus estimates are for year-over-year earnings growth of 11.11% with revenue increasing by 0.17%.
Finisar has been assigned a $40.00 price target by equities research analysts at Northland Securities which would suggest a potential upside of 59.49% from the company’s previous close.
Finisar Corporation presently has a consensus rating of “Buy” and an average target price of $36.27.
Option trade to consider: Buy the FNSR OCT 20 2017 25.000 CALL at approximately $1.30.
Barnes & Noble, Inc. (NYSE:BKS) - the overall sentiment remains very bearish. The company continues to face strong competition from online behemoth Amazon.com (AMZN), and it continues to lose money. Barnes & Noble has not managed to post a quarterly profit since the third quarter 2016, and the string of losses has weighed heavily on the stock.
BKS is up +7.1% over the last three months and down -17.1% over the last six months. The stock has returned -35.0% over the last year. The current stock price is $7.50.
Option trade to consider: Buy the BKS OCT 20 2017 7.000 PUT at approximately $0.45.
Friday, September 08
Kroger Co (NYSE:KR) - will release its quarterly results before the market open, with the consensus calling for earnings of $0.41 per share. During the same period last year the company earned $0.47 per share, and the stock is down 33.9% on the year.
Earnings per share are expected to fall slightly, and some analysts still expect Kroger to revise down its full-year guidance in the months to come as it seeks to defend its share of the nearly $800 billion U.S. grocery market.
Amazon's takeover of Whole Foods Market Inc., as well as deep-discounting European chains and online grocers, are threatening Kroger's market share.
Kroger has been confronting the multitude of headwinds by slashing prices on staples, adding online ordering options and meal kits in some stores, and investing in technology to better market to consumers. It is slowing store growth, offering voluntary buyouts and ramping up other cost-cutting efforts to do so.
Option trade to consider: Buy the KR OCT 20 2017 22.000 PUT at approximately $0.85.
There’s still a good backdrop for stocks with economic growth looking good, and the Fed appears as if they will not be raising rates in December. However, take into consideration for government deadlines coming up -- the federal debt ceiling must be raised by late September and a spending bill also must be approved by Sept. 30 to avoid a government shutdown.
Also, the Labor Day holiday could mean lighter trading volume over the rest of the week, which could exacerbate market volatility.
Also, an understanding that the market's going to continue to react in the short term to any further signs of escalation or de-escalation of the geopolitical risk which will help plan for a successful and profitable week ahead.
Therefore, with the market uptrend still under pressure, investors should exercise extra caution. But by learning to use call and put options, investors can significantly reduce risk and capitalize on basing stocks that are making breakaway gains caused by earnings reports.
You will notice that most options trades to consider have short-term expiry dates, as the expected movement of the option’s price should occur just prior to, or shortly after, report of earnings. It is entirely up to the individual trader as to whether they add a stop-loss or not.
Also Note: These suggestions for options trade considerations require investors/traders to use their own discretion as to when to enter or exit! As well, it is advisable to do further research and due diligence before executing your trade.
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