by Ian Harvey
October 25, 2017
Caterpillar Inc. (NYSE:CAT)
Here is an overview of Caterpillar Inc. (NYSE:CAT) winning options call trade after reporting earnings. This options trade was recommended to Stock Options Members on Friday, October 20, 2017 in “Cut-to-the-Chase” Recommendations - Week Beginning Monday, October 16, 2017”, as well as in “Earnings Predictions for the Week Beginning October 23, 2017”, with the company reporting great earnings on Tuesday, October 24, 2017; producing more than expected profits within a couple of days of executing the trade!
The Recommendation……from “Cut-to-the-Chase” Recommendations - Week Beginning Monday, October 16, 2017” and also mentioned as a consideration in “Earnings Predictions for the Week Beginning October 23, 2017”
Melius Research’s Rob Wertheimer writes that for the second time in two decades, machinery stocks are trading at a premium to multi-industry.
From the note:
Underlying demand is strong. North American construction is touching prior highs, and high frequency indicator Komtrax shows dirt being moved growing single digits after a long weak stretch. Trucking rates and utilization are picking up; that lurked beneath strong machinery results in 2007-8. Machinery multiples should have the indicators are volatile and low quality, but all pointing positive. Blow up risks are low…there’s no housing crisis already contracted, but too often shares trade at high multiples on high earnings for too long.
Wertheimer writes that heavy machinery maker Caterpillar Inc., which manufactures construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives, is one of his highest Buy-Accumulate rated stocks.
Caterpillar reports third quarter earnings before the opening bell on October 24 and analysts expect the construction equipment giant to earn $1.20 a share. The stock closed at $130.71 on Oct. 13, up 40.9% year-to-date, and in bull market territory, 57.4% above its post-election low of $83.06 set on Nov. 8.
** OPTION TRADE: Buy the CAT JAN 19 2018 135.000 CALL at approximately $3.10. Place a pre-determined sell at $6.20.
Also include a protective stop loss of $1.25.
Caterpillar Inc. blew past Wall Street’s profit and revenue estimates for the third quarter, driven by surprisingly strong demand for its construction equipment in North America and robust sales in China.
The company’s shares rose as much as 7 percent to a record high of $140.44, helping push the Dow Jones Industrial Average to an all-time high.
The bellwether for the industrial sector posted strong growth across its key businesses, signaling resurgence in its construction, energy and mining markets.
The company also raised its full-year forecasts for sales and earnings, expecting revenue in its construction business to surge about 20 percent, and mining business to jump 30 percent.
Profit beat expectations for the sixth
straight quarter even after analysts had raised their estimates for
July-September period by nearly 30 percent in the past three months. Revenue
beat estimates for the third straight quarter.
At the time of the recommendation, Friday morning, CAT stock price was sitting at $131.56.
Caterpillar's stock rallied $9.07, or 6.9%, ahead of the open Tuesday morning, on track to open at a record high.
So, for those traders who managed to execute this trade recommended by Stock Options Made Easy; a nice tidy potential profit of 155% within a couple of days.
ACTION TO TAKE…….
As you would have by now realized, many of our trades are based on earnings predictions. This is not to say all trades recommended to members follow this pattern, but during earnings season this strategy has been very profitable.
Our approach is to predict whether a company will beat or miss estimates, whether the stock will appreciate or depreciate as a result and what strategies investors and traders can use. This type of prediction is based on thorough investigation and fundamentally based research, and the results have been very exceptional.Our proven track record says it all!!
Members of Stock Options Made Easy are provided with an extensive reason as to which direction a stock will move after earnings, followed up by a recommended options trade.
What To Do Now…….
If you interested in being part of this profitable action just click here……