“Cut-to-the-Chase” Recommendations
- Week Beginning April 04, 2016 -

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.

Thursday, 7th April, 2016
Option Trade – WD-40 Company (NASDAQ:WDFC) Calls

**OPTION TRADE: Buy the WMT May 20 2016 70.000 call at approximately $0.90. Sell price is left to your own judgment.

Wal-Mart Stores, Inc. (NYSE: WMT), which is engaged in the operation of retail, wholesale and other units in various formats around the world, has been trending higher since the latter part of 2015, and an upbeat March chain store sales report should help WMT build on its recent momentum. The report is due today, April 7th. WMT has appreciated by 12.3% so far this year.

The overall economy remains on solid ground for now, and low gasoline prices should keep strength under retailers for the time being.

The first half of 2015 saw Wal-Mart suffer, as fears over the company’s moves to increase its minimum wage, and invest heavily in growing its e-commerce business weighed on the stock. The short-term implication of the moves will continue to hurt earnings, but Wall Street has returned to the stock, possibly with the idea that the long-term effect will be beneficial for the company. Even with the recent gains, the stock remains a good value, with a P/E of just under 15, and there should be additional upside potential following the March retail sales report.

And now, analysts are becoming more positive towards Wal-Mart. Goldman Sachs raised their price from $62.00 to $66.00 in a research report sent to investors yesterday. Vetr raised Wal-Mart Stores from a hold rating to a buy rating and set a $63.56 price target for the company. Nomura set a $70.00 price target on shares of Wal-Mart Stores and gave the stock a buy rating.

Wal-Mart Stores has a one year low of $56.30 and a one year high of $81.39. The company has a market capitalization of $219.96 billion and a PE ratio of 15.11. The company has a 50 day moving average price of $67.30 and a 200-day moving average price of $63.15.

Thursday, 7th April, 2016
Option Trade – WD-40 Company (NASDAQ:WDFC) Calls

**OPTION TRADE: Buy the CAT May 2016 70.000 put at approximately $1.55. Sell price is left to your own judgment.

Caterpillar Inc. (NYSE: CAT), a manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives, has fought against sluggish economic conditions for quite awhile now, with very little movement in the past year.

Even though the U.S. economy has been strong, the rest of the world is showing global weakening, and Caterpillar Inc is sitting right in the middle of global manufacturing, mining and energy, which, as we know, is undergoing extreme pressure.

When looking at CAT’s technical chart, it has rallied some 36% since January on the hope that these sectors were recovering.

But recent news seems to indicate that those hopes were premature. And now CAT is generating some very familiar overbought signals. CAT’s typical retracement from this position over the past 18 months comes in at -30.85% over about 26.5 weeks. If it were to give us a repeat performance, it would drop to $53.41 by next October.

If that seems like a long way off in a volatile market, a conservative target can be observed at the recent support node at $70.00.

Also, CAT reports earnings on April 16. Obviously, traders have been buying the rumors of a strong report. But last time around, CAT reported a -22.60% drop in quarterly revenue year-over-year. Considering the fall-off in global manufacturing this past quarter, the odds are that CAT has not managed to improve their position.

Macquarie has recommended investors to avoid shares of equipment makers Caterpillar Inc. citing a challenging year ahead.

The brokerage has an Underperform rating on the stock, with a price target of $51.

"We continue to recommend investors sell Caterpillar on any strength in the stock and remain Underperform as we think 2016 will be a challenging year given we think the worst of the oil and gas declines are still ahead of us," analyst Sameer Rathod wrote in a note.

"We think the continued weakness in pricing is attributable to softening end-market demand, excess inventory, and increased competition. We continue to think pricing will be weaker in 2016 than 2015 given the weak end market demand we see," the analyst elaborated.

Rathod said the global dollar value of inventory increased by 6.5 percent month over month and US-listed inventory rose 8.1 percent, indicating "continued weakness in end markets."

The analyst is starting to see the deflation due to excess liquidity and malinvestment in supply and thinks "this trend is likely to continue and price erosion and pressure on margins will become a larger factor in coming quarters."

Other sell-side analysts have also given opinions on where they believe the stock is headed in the short-term. The current consensus target price is currently $64.6. This projection is including data provided by10 different analysts. The range of the target price projections is $52-$73 with a standard deviation of 6.168.

There are 10 brokerage firms which have suggested “Sell” for the company, and a Strong Sell rating was given by 1 brokerage firm.

Also, covering analysts are currently anticipating the company to post EPS of $0.66 for the quarter. During the last period, Caterpillar, Inc. reported quarterly earnings per share actual of $0.74.

Thursday, 7th April, 2016
Option Trade – WD-40 Company (NASDAQ:WDFC) Calls

**OPTION TRADE: Buy the WDFC May 2016 115.000 call at approximately $0.85. Sell price is left to your own judgment.

WD-40 Company (NASDAQ: WDFC), a global consumer Products Company, will issue its Q216 quarterly earnings data today, April 7th.

Analysts expect the company to announce earnings of $0.86 per share, up 13.16% or $0.10 from last year’s $0.76 per share. WDFC’s profit will be $12.22M for 31.31 P/E if the $0.86 EPS becomes reality. After $0.83 actual earnings per share reported by WD-40 Company for the previous quarter, Wall Street now forecasts 3.61% EPS growth.

Also, analysts expect the company to announce revenue of $99.10 million for the quarter.

The stock of WD-40 Company formed an up wedge with $132.50 target or 23.00% above yesterday’s $107.72 share price. The 8 months wedge indicates low risk for the $1.53 billion company. If the $132.50 price target is reached, the company will be worth $351.90M more.

The company has a market capitalization of $1.55 billion and a P/E ratio of 34.30. WD-40 Company has a 12-month low of $80.15 and a 12-month high of $111.00. The stock has a 50 day moving average of $106.68 and a 200-day moving average of $99.64.

WD-40 Company has risen 27.49% since August 28, 2015 and is uptrending. It has outperformed by 24.66% the S&P500.

Wednesday, 6th April, 2016
Option Trade – Rite Aid Corporation (NYSE:RAD) Puts

**OPTION TRADE: Buy the RAD May 2016 8.000 put at approximately $0.10. Sell price is left to your own judgment.

Rite Aid Corporation (NYSE: RAD), a retail drugstore chain, is slated to report fourth-quarter fiscal 2016 results tomorrow, April 7th, before the opening bell.

The consensus Wall Street forecast calls for the third largest drugstore chain in the United States to post fiscal fourth-quarter earnings per share (EPS) of $0.06 (or half of the $0.12 reported in the year-ago period) but for revenue to have risen more than 22 percent to $8.40 billion. EPS have not topped expectations in the past three periods, falling in line in the third quarter and missing by a penny or two before that. However, the current estimate has not changed in the past 60 days.

Rite Aid's comparable store sales (comps) suddenly turned negative in the fourth quarter of fiscal 2016 as it recorded dismal comps in all three months of the period. The company's comps fell 0.6%, owing to a respective decline of 0.4% and 0.8% in front-end and pharmacy comps.

In Oct 2015, Walgreens Boots announced that it has agreed to acquire Rite Aid Corporation for a total enterprise value of $17.2 billion, including acquired net debt. The transaction is expected to close in the second half of calendar year 2016. Currently, this acquisition is progressing as per Walgreen Boots’ plans, following Rite Aid’s shareholders approving the transaction on Feb 4, 2016. However, the transaction is still subject to the expiration or termination of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended and other customary closing conditions.

The company’s most recent volume stood at 10.6 million shares as compared to average volume of 12.48 million shares. Over the one year trading period, the stock has a high price of $9.47 and its low price is recorded at $5.88. The company has a market cap of $8.46B.

4 analysts have rated the company as a strong “Hold” with an “Outperform” rating given by 3 analyst.

Tuesday, 5th April, 2016
Option Trade – Apollo Education Group Inc (NASDAQ:APOL) Puts

**OPTION TRADE: Buy the APOL May 2016 8.000 put at approximately $0.20. Sell price is left to your own judgment.

Apollo Education Group Inc (NASDAQ: APOL), a private education provider, is set to report second quarter fiscal 2016 results tomorrow, April 6th, after the markets close. Analysts expect Apollo Education Group to post earnings of ($0.10) per share for the quarter.

Apollo Education Group last released its quarterly earnings results on Monday, January 11th. The company reported $0.29 EPS for the quarter, missing analysts’ consensus estimates of $0.31 by $0.02. The business had revenue of $586 million for the quarter. Apollo Education Group’s revenue was down 18.0% compared to the same quarter last year. During the same quarter in the prior year, the business posted $0.44 EPS.

Apollo Education ended fiscal 2015 with dismal results, a trend which seems to have continued into 2016. Apollo Education's first quarter earnings and revenues were hurt by declining enrolment trends at its flagship University of Phoenix (UOP). UOP's enrollments have been sluggish for several quarters now due to regulatory challenges, and changes and competition in the higher education industry. Though the company is undertaking several initiatives to transform UOP, it will take several quarters before enrollments rebound and stabilize. As such, UOP's enrollment trends are likely to decline year over year in the second quarter of fiscal 2016 as well.

Enrollment at Apollo Global was hurt by an increase in student scholarship and lower number of class starts in the first quarter.

Apollo Education Group signed a definitive agreement to be acquired by a consortium of investors for about $1.1 billion in Feb 2016. These investors include Chicago-based investment company, The Vistria Group, LLC; funds affiliated with Apollo Global Management, LLC (APO), one of the leading global alternative investment managers and Najafi Companies, an Arizona-based investment firm. If the deal gets all the necessary approvals, the transaction is expected to close in Aug 2016.

Many analysts are quite negative towards APOL -- Bank of America lowered Apollo Education Group to a “hold” rating -- Zacks Investment Research has a “hold” rating -- Deutsche Bank reissued a “hold” rating on shares of Apollo Education Group -- Piper Jaffray reaffirmed a “neutral” rating. The stock currently has an average rating of “Hold”.

The firm’s 50 day moving average is $8.33 and its 200-day moving average is $8.34. The company’s market capitalization is $871.57 million. Apollo Education Group Inc has a 52-week low of $6.31 and a 52-week high of $18.39.

Monday, 4th April, 2016
Option Trade – Darden Restaurants, Inc. (NYSE:DRI) Calls

**OPTION TRADE: Buy the DRI May 2016 70.000 call (DRI160520C00070000) at approximately $0.95. Sell price is left to your own judgment.

Darden Restaurants, Inc. (NYSE: DRI), a full service restaurant company, will be issuing its Q316 quarterly earnings data tomorrow, Tuesday, April 5th. Analysts expect the company to announce earnings of $1.06 per share, up from $0.99 during the same period last year, and revenue of $1.80 billion for the quarter.

Darden Restaurants has been trending sharply higher over the last couple months, and shares are now up 5.0% on the year. The stock’s uptrend was fueled by an upbeat earnings report in mid-December.

Darden Restaurants has a solid earnings track record, posting better than expected quarterly earnings for each of the last five quarters. Last quarter the company issued guidance numbers that were ahead of the market’s forecast. While the market has a consensus estimate of $1.06 for the quarter, Darden forecast earnings in a range of $1.18 and $1.21 for the quarter. Analysts forecast very strong earnings growth for the company, with earnings expected to climb 36.3% during the current year, and by 12.9% next year.

Analysts have an average price target of $70.48 for the stock, which suggests 5.4% upside from the current price. If the company can post another set of solid quarterly numbers, shares could quickly rise to that target.