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.
Option Trade - Dicks Sporting Goods Inc. (NYSE:DKS) Puts
Thursday, August 10, 2017
** OPTION TRADE: Buy the DKS SEPT 15 2017 35.000 PUT at approximately $1.50. Sell price is left to your own judgment.
Dicks Sporting Goods Inc. (NYSE:DKS), an omni-channel sporting goods retailer offering an assortment of sports equipment, apparel, footwear and accessories in its specialty retail stores in the eastern United States is expected to report earnings on Tuesday, August 15, 2017, before the market opens. The report will be for the fiscal Quarter ending Jul 2017. Based on 11 analysts' forecasts, the consensus EPS forecast for the quarter is $1.02. The reported EPS for the same quarter last year was $0.82.
Dick's shares are down nearly 33% for the year so far. The S&P 500 Index (SPX) is up 10.7% for 2017 to date.
Over the last couple of weeks, two analysts
have decreased their EPS estimates for the current year while three have
dropped their number for next year. The overall impact on Consensus Estimates
isn’t overly dramatic but it’s still leaving a mark. The current year number
has dropped from $3.71 to $3.67 while next year’s number is off from $4.08 to
Dicks Sporting Goods is known as the biggest name in big box retail sporting goods with help from the recent bankruptcy and liquidation of Sports Authority this last year. After the closing of Sports Authority, Dicks Sporting Goods was left miles out ahead of any competitor and rolled out an ambitious expansion plan to secure the now up for grabs market share Sports Authority left behind. But even with the closure of arguably one of Dicks Sporting Goods biggest competitors, they are still struggling to meet the metric forecasts set by upper management. Therefore, management certainly needs a good shake-up.
Dicks Sporting Goods opened the fiscal year with a projected first quarter growth of 3 to 4% but was only able to reach 2.4%. After these numbers were announced DKS stock fell roughly 18% in the month of May alone.
However, the company is still moving forward with its expansion plans to grab market share. DKS plans to add 43 new stores in 2017 along with 8 Golf Galaxy and 8 Field and Stream stores, some of which have already opened in the first quarter. Even after the shortfall and aftermath of the first quarter fall out DKS plans to open 13 new stores in the second quarter. Continuing expansion is key to growth and development, but management seems to be spreading funds too thin.
Analysts and Hedge Funds Opinions
Dick's Sporting Goods Inc. was downgraded to peer perform at Wolfe Research recently based on concerns about the shift to e-commerce from bricks-and-mortar retail. "Given the challenging reads through the first half of 2017, we believe any share gain potential will largely be eroded away by current oversupply, with too many goods chasing too little demand," analysts led by Adrienne Yih wrote. There's also "limited evidence" that Dick's is snapping up market share from competitors that are leaving the sector, the note said. "We believe Dick's is susceptible to severe deleverage and leaves us skeptical of further store openings beyond the current outlined plans," the note said, with Yih adding that Dick's is "sacrificing gross margin for comp" in an effort to price competitively.
Also, BidaskClub lowered Dick's Sporting Goods Inc to Strong Sell on August 07, 2017,
With the current valuation of DSG stock and the amount of uncertainty due to the competitive nature of the retail industry poses a great risk. With many other stocks such as Foot Locker (NYSE: FL) that pose to be a better buy after DKS not reaching there projected growth. Comparing DKS earnings per share to Foot Locker's earnings per share, DKS does not justify the premium that need to be paid to buy its stock as it continues to drop.
Dick’s Sporting Goods has a market cap of $4.19 billion, a PE ratio of 14.42 and a beta of 0.47. Dick’s Sporting Goods has a 12 month low of $34.55 and a 12 month high of $62.88. The firm has a 50 day moving average price of $38.36 and a 200-day moving average price of $45.85.
Option Trade - Macy's Inc. (NYSE:M) Puts
Wednesday, August 09, 2017
** OPTION TRADE: Buy the M AUG 18 2017 23.000 PUT at approximately $0.90. Sell price is left to your own judgment.
Specialty retailer Macy's Inc. (NYSE:M) is expected to report its second-quarter numbers on Thursday, August 10. The company is scheduled to report its results before the market opens, with the consensus calling for earnings of $0.44 per share, down from 54 cents last year. Analysts expect sales of $5.52 billion for the quarter compared with $5.87 billion last year.
When it last reported results in May, the stock dropped more than 17% on the day it released first-quarter earnings.
Macy’s shares are down 18.6% for the past three months and down 34.2% for the year so far. The SPDR S&P Retail ETF (XRT) is down 6.1% for the year to date, and the S&P 500 Index (SPX) is up 10.8% for 2017 so far.
Challenging retail landscape, aggressive pricing strategy, waning mall traffic and increased online competition have remained the major deterrents for Macy’s. In addition, the company warned investors that its margins may continue to feel the pinch and expects gross margin to shrivel by 100 basis points in the second quarter.
Furthermore, Macy’s dwindling top-line and bottom-line results remain the primary threat for investors. In fact, a look at the company’s performance in fiscal 2016 unveils that net sales decreased 7.4%, 3.9%, 4.2% and 4% in the first, second, third and fourth quarters, while earnings per share declined 28.6%, 15.6%, 69.6% and 3.3% during the respective quarters.
Notably, during the first quarter of fiscal 2017, the scenario was no different, as net sales and earnings per share declined 7.5% and 40%, respectively.
The back-to-school shopping season is in full swing, and Cowen & Company analysts have identified a number of headwinds, including continued mall traffic declines, a lack of interesting apparel product, and the threat of Amazon.com Inc. (AMZN).
Analysts are concerned that promotions in the beauty category could weigh on results.
Executives and analysts have recently noted a high level of promotional activity in the cosmetic section of department stores. Macy’s executives also highlighted the issue during their early June investor event.
“If you remember the factors that we outlined on the first-quarter call, these factors continue to impact us in the second quarter,” said Macy’s Chief Financial Officer Karen Hoguet. “It was the excess inventory coming out of the holiday season that increased the promotional nature of the beauty business.”
“Checks suggest key categories like accessories remain challenging, and we’re very concerned about recent discounting in cosmetics (one of the last industry holdouts from excessive promotions),” wrote analysts led by Michael Binetti.
UBS also believes that recent cuts to the company’s sales, general and administrative (SG&A) expenses, which are meant to stabilize earnings before interest and taxes (EBIT) are “unsustainable.”
UBS rates Macy’s shares neutral with a $23 price target.
The company also reduced its 2016 earnings guidance to a range of $2.95-$3.10 from previous guidance of $3.15-$3.40, which pushed the stock downward.
Management noted challenges across the broader retail sector and said sales were particularly weak in handbags and watches.
Shares tanked again in May, as comparable sales fell 5.2% on an owned basis and 4.6% on an owned plus licensed basis. Overall revenue was down 7.5% to $5.34 billion, missing expectations at $5.47 billion as the company closed stores. On the bottom line, adjusted earnings per share dropped from $0.40 to $0.24, well below the consensus at $0.35. Nonetheless, the company stuck with its guidance for the year, calling for adjusted EPS of $2.90-$3.15, excluding the sale of its San Francisco men's store. Shares fell 17% that day and have traded sideways since.
Macy’s has been investing in growing its online business, but so far those efforts have only weighed on the company’s margins, and Wall Street has not been patient in waiting for the investments to yield higher online sales.
Analysts and Hedge Funds Opinions
Macy’s Inc. was downgraded by Zacks Investment Research from a “hold” rating to a “sell” rating in a research note issued to investors on Tuesday.
According to Zacks, “Macy’s waning top and bottom-line performance has been a major concern. As a result, the stock has been hit hard and underperformed the industry in the past six months. Challenging retail landscape, aggressive pricing strategy, waning mall traffic and increased online competition have been major deterrents. Macy’s warned investors that its margins may continue to feel the pinch. Management now envisions fiscal 2017 gross margin to contract 60–80 basis points, while for the second quarter it expects the same to shrivel by 100 basis points from the year-ago period. Macy’s continues to project comps on an owned basis to decrease in the band of 2.2–3.3% and sales to decline in the range of 3.2–4.3% in fiscal 2017.”
Also, Macy’s Inc. was downgraded by equities researchers at Vetr from a “strong-buy” rating to a “buy” rating in a report issued on Thursday, July 27th. They presently have a $26.02 price objective on the stock. Vetr‘s price target suggests a potential upside of 10.63% from the stock’s current price.
Two investment analysts have rated the stock with a sell rating, nineteen have given a hold rating, six have assigned a buy rating and one has issued a strong buy rating to the stock.
There’s no denying that it’s been a tough time for brick-and-mortar retailers as more consumers increasingly shop online, and less consumers shop at malls and major department stores. That trend has led many companies with large store presences to adjust their strategies to adapt.
Macy’s has a market cap of $7.16 billion, a price-to-earnings ratio of 12.69 and a beta of 0.84. The firm has a 50 day moving average of $22.80 and a 200-day moving average of $27.21. Macy’s has a 12-month low of $20.85 and a 12-month high of $45.41.
Option Trade - Twenty-First Century Fox Inc (NASDAQ:FOXA) Puts
Tuesday, August 08, 2017
** OPTION TRADE: Buy the FOXA AUG 18 2017 27.000 PUT at approximately $0.30. Sell price is left to your own judgment.
The way people consume entertainment has changed and it's going to continue to change.
Cord cutting, or ditching a traditional cable subscription in favor of using streaming services, has been a slowly growing phenomenon. In addition, the movie business has become all about global blockbusters, pushing smaller films to alternative platforms in many cases.
Those changes, while they are in their early days, will upend the cable business as we know it. Consumers will only pay for the stations they want and that will certainly push lesser channels out of existence. It will also force even successful cable networks to do more with less because they will no longer receive carriage fees from consumers who don't actually watch them.
In addition, cord cutting will mean even smaller audiences for the traditional broadcast networks. While in many markets you can get ABC, CBS, NBC, and FOX using an HDMI antenna, many cord-cutters will opt not to do that.
The slow death of cable and the morphing of the movie business into one where only big hits matter creates a potentially very bad situation for Twenty-First Century Fox Inc. (NASDAQ:FOXA). The company could lose its edge with its broadcast network being viewed by nearly anyone with cable, its cable networks pulling in less revenue, and its film business continuing to struggle.
Twenty-First Century Fox, Inc. is expected to report earnings tomorrow, August 9, after market the closes. The report will be for the fiscal Quarter ending Jun 2017. Based on 7 analysts' forecasts, the consensus EPS for the quarter is $0.34, seen tumbling 24% on 1.3% revenue growth to $6.73 billion compared with $6,646 million reported in the prior-year quarter. The reported EPS for the same quarter last year was $0.45.
Note that the Consensus Estimate has decreased by a couple of cents witnessed in the past 30 days.
An increase in cost at Cable Network Programming has been worrying. In the first nine months of fiscal 2017, Cable Network Programming costs have increased 6.3% to $7,687 million. The rise in expenses was mostly due to elevated sports programming costs. It is believed that an increase in expenses, due to higher sports programming costs may hurt the margins and affect the bottom line in the coming quarters.
Cable lost 1.9 million subscribers in 2016, according to data from SNL Kagan, and the research firm expects another nearly 11 million to defect over the next five years. That number does not factor in the impact of skinny bundles, cable or streaming cable-like packages which offer a limited selection of channels.
Losing cable households directly hits FOX's bottom line.
In addition, as the cable universe gets smaller, the potential audience goes down as well. As that happens, a smaller pool of people who may see a hit show, leads to lower ceilings for ad revenue.
On the movie side, FOX has a weakness in franchises; FOX simply has nothing of the caliber of Disney and relies mostly on sputtering franchises including Alien , Planet of the Apes , and Ice Age.
And, troubling culture deepens at Fox……
Analysts and Hedge Funds Opinions
Zacks Investment Research lowered Twenty-First Century Fox from a “hold” rating to a “sell” rating in a research report on Tuesday, July 11th.
Also, Texas Permanent School Fund reduced its stake in Twenty-First Century Fox, Inc. by 3.8% during the second quarter. The firm owned 295,675 shares of the company’s stock after selling 11,792 shares during the period. Texas Permanent School Fund’s holdings in Twenty-First Century Fox were worth $8,379,000 as of its most recent SEC filing.
Twenty-First Century Fox, Inc. has a market capitalization of $52.19 billion, a P/E ratio of 17.34 and a beta of 1.27. Twenty-First Century Fox, Inc. has a 1-year low of $23.33 and a 1-year high of $32.60. The stock’s 50 day moving average price is $27.99 and its 200 day moving average price is $29.44.
EXTRA OPTIONS TRADES
Add the following trades that appeared in the article “Earnings Predictions for the Week Beginning August 07, 2017.”
These trades will be included in the results.
Tuesday, August 08
Michael Kors Holdings Ltd (NYSE:KORS) -- Wall Street expects the company’s earnings to fall 29.5% YoY (year-over-year) to 62 cents per share. Total sales are likely to contract 7% YoY to $991 million, which would be the fourth consecutive quarterly decline in KORS’ top line.
The handbag business continues to face challenges as millennials buy expensive 'athleisure' apparel from Lululemon Athletica inc. (NASDAQ: LULU ) instead of pricey purses from Michael Kors or Coach Inc (NYSE: COH ), and KORS itself seemed to admit as such when it agreed to buy Jimmy Choo last month. That $1.25 billion deal was intended to diversify KORS away from handbags, indicating a lack of confidence in its legacy business.
Even if the company manages an earnings beat, it still implies declining profits, and the Jimmy Choo deal adds risk to the balance sheet.
Option trade to consider: Buy the KORS SEPT 15 2017 37.500 PUT at approximately $2.20.
Valeant Pharmaceuticals Intl Inc (NYSE:VRX) -- Wall Street analysts expect $0.96 EPS, down $0.44 or 31.43 % from last year’s $1.4 same quarter earnings. This translates into $333.61 million profit for VRX giving the stock a 4.29 P/E.
More hurdles are anticipated throughout the rest of 2017, guidance could come back down again, even after last quarter’s pleasant surprise of revenue and adjusted EBITDA outclass for 2017.
Option trade to consider: Buy the VRX SEPT 15 2017 15.000 PUT at approximately $1.15.
Option Trade - Depomed Inc (NASDAQ:DEPO) Puts
Monday, August 07, 2017
** OPTION TRADE: Buy the DEPO SEPT 15 2017 9.000 PUT at approximately $0.50. Sell price is left to your own judgment.
The healthcare sector is in the spotlight this week, and Depomed Inc (NASDAQ:DEPO), a specialty pharmaceutical company, will be reporting earnings results after the market closes today, Monday, August 7.
The Company focuses on pain and other central nervous system (CNS) conditions. Its products include NUCYNTA ER (tapentadol extended release tablets), NUCYNTA IR (NUCYNTA) (tapentadol), Gralise (gabapentin), CAMBIA (diclofenac potassium for oral solution), Zipsor (diclofenac potassium) and Lazanda (fentanyl).
Wall Street analysts expect Depomed, Inc. to post earnings per share (EPS) of ($0.41) for the current quarter. The lowest EPS estimate is ($0.53) and the highest is ($0.30). Depomed reported earnings of ($0.17) per share in the same quarter last year, which would indicate a negative year over year growth rate of 141.2%.
On average, analysts expect that Depomed will report full-year earnings of ($0.99) per share for the current year, with EPS estimates ranging from ($1.17) to ($0.80). For the next financial year, analysts anticipate that the business will report earnings of ($0.09) per share, with EPS estimates ranging from ($0.32) to $0.14.
Shares of Depomed have been grinding lower over the past year, losing more than half their value and touching a three-year low of $9.38 on June 13. At last check, DEPO was trading at $9.47, and data suggests traders are betting on more losses in the near term.
Analysts and Hedge Funds Opinions
BidaskClub downgraded shares of Depomed, Inc. from a sell rating to a strong sell rating in a research note released on Saturday morning.
Several other analysts have also recently commented on the company…..
Three investment analysts have rated the stock with a sell rating, five have assigned a hold rating and four have issued a buy rating to the company’s stock.
Also, Russell Investments Group Ltd. cut its position in shares of Depomed, Inc. by 66.0% during the first quarter, according to its most recent disclosure with the Securities and Exchange Commission. The fund owned 38,118 shares of the specialty pharmaceutical company’s stock after selling 74,148 shares during the period. Russell Investments Group Ltd. owned approximately 0.06% of Depomed worth $478,000 as of its most recent SEC filing.
Depomed has a 12 month low of $9.38 and a 12 month high of $27.02. The stock’s market cap is $590.37 million. The company’s 50-day moving average is $10.55 and its 200-day moving average is $13.10.
Option Trade - Monster Beverage Corporation (NASDAQ:MNST) Calls
Monday, August 07, 2017
** OPTION TRADE: Buy the MNST SEPT 15 2017 55.00 Call at approximately $1.05. Sell price is left to your own judgment.
The maker of energy drinks Monster Beverage Corporation (NASDAQ:MNST) is set to report Q2 results on Tuesday, after the closing bell. Wall Street expects EPS to rise 21% to 40 cents on 10% revenue growth of $907 million. Analysts say the company's upcoming product releases this year should lift sales. They also like Monster's prospects internationally, citing its distribution deal with Coca-Cola (KO) and growth in energy drinks, which have held up even as consumers become more health conscious and turn away from traditional soft drinks.
Shares broke out last month and remain in buying territory.
It's not just China, where Monster Beverage is looking to capture 75% of the potential energy drink market; it's also into other international growth markets like other parts of Asia, Africa and South America. Monster Beverage is entering these International markets right now, so the growth profile for this company could definitely be ready to unleash.
From a technical standpoint, this stock has been up-trending over the past two months, with shares moving higher off its low of $ 40.64 to its recent high of $54.03 a share. During that uptrend, this stock has been making mostly higher lows and higher highs, which is bullish technical price action.
Monster Beverage stock has risen 20.4% on a YTD (year-to-date) basis as of July 25.
Also, shares of Monster Beverage rose 12% in the first half of 2017.
The energy drink specialist actually started the year on a sour note. Share prices fell nearly 5% in the first two months, while the S&P 500 rose 6%. The tide turned in early March when Monster Beverage delivered the first of two solid earnings reports. The company crushed Wall Street top and bottom line estimates in the fourth quarter of fiscal 2016 and followed up with in-line results in the first quarter of 2017. Driven by these reports, share prices rose 11% in March and another 11% in May.
Monster Beverage is currently rolling out energy drink distribution in a slew of new markets, powered by partner Coca-Cola’s massive distribution network. The company aims to address 75% of the potential energy drink market in China by the summer, up from 35% at the end of 2016. In more mature markets, Monster has been introducing a number of brand-new products such as the Mutant brand of highly caffeinated soda and the Monster Hydro range of caffeine-infused waters.
Monster Beverage has been delivering stronger sales growth than its nonalcoholic beverage peers Coca-Cola (KO), Dr Pepper Snapple (DPS), and PepsiCo (PEP), primarily because energy drinks are enjoying higher demand compared to conventional carbonated soft drinks.
The analysts’ expectation of 9.4% sales growth in Monster Beverage’s 2Q17 sales is supported by the strong demand for the company’s Monster Energy brand drinks. Also, the addition of Coca-Cola’s energy drink brands to the company’s portfolio has been boosting its sales.
Monster Beverage has a consensus “buy” rating backed by the strong demand for its energy drink brands. The company’s innovation and international expansion are also expected to further boost its future sales. Monster Beverage’s deal with Coca-Cola (KO) added some strong brands like NOS and Full Throttle to its energy drink portfolio.
Monster Beverage is also focused on the innovation of new product lines and flavors. In 2Q17, the company introduced Hydro in the US, the United Kingdom, and Ireland. Hydro is a noncarbonated low-calorie energy drink. The company plans to expand the distribution and sales of Hydro in certain countries in Europe and Africa by early 2018.
The company also launched Lewis Hamilton 44 Monster energy drink in the United Kingdom at the end of April 2017. The company plans to launch this product in an additional 19 European markets. By the end of July, Hamilton 44 is expected to be available in 25 EMEA (Europe, the Middle East, and Africa) markets. Another recently introduced product is the new Mutant White Lightening super soda with zero sugar.
The company is also geared to launch Mango Loco, a new flavor in its Monster Energy juice portfolio, in the US market in September 2017. Monster Beverage is also developing new espresso Monster Energy drinks in two flavors. The company expects to launch the new espresso drinks in eight-ounce slim cans in the United States before the end of 2017.
Analysts see the company maintaining annual revenue growth of roughly 11% for the next several years, while bottom-line earnings are expected to rise at a 20% annual pace for the next half-decade. Monster has all the elements in place to deliver solid financial growth for the long haul, and share prices seem likely to follow suit.
Analysts and Hedge Funds Opinions
Zacks Investment Research upgraded shares of Monster Beverage Corporation from a hold rating to a buy rating in a research report sent to investors on Monday, July 17th. Zacks Investment Research currently has $58.00 price target on the stock.
According to Zacks, “Product innovation plays a huge role in Monster Beverage's success. The company has several new products lined up for the remaining of 2017 which is expected to boost sales. Again, the deal with Coca-Cola is expected to enhance the company’s foothold in the international energy drinks market. The company’s proven track of innovation and product extensions is expected to drive sales further. Meanwhile, Monster Beverage's shares have outperformed the Zacks categorized Beverages-Soft Drinks industry, year-to-date.”
Several other analysts have also recently commented on the company…..
As of July 25, Monster Beverage’s stock was rated a “buy” by 78% of the 18 analysts covering the stock. The company’s stock was rated “hold” by four analysts. None of the analysts gave a “sell” rating. Monster Beverage Corporation currently has a consensus rating of Buy and a consensus target price of $56.75.
Several institutional investors have recently made changes to their positions in the stock…..
Strong demand for the company’s energy drink brands, expansion into new markets, and innovation are expected to drive the company’s performance.
Monster Beverage Corporation has a market capitalization of $29.93 billion, a P/E ratio of 42.44 and a beta of 0.96. Monster Beverage Corporation has a 1-year low of $40.64 and a 1-year high of $55.50.