“Cut-to-the-Chase” Recommendations
- Week Beginning -
Monday, August 13, 2018

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.


You may also wish to read Stock Options Made Easy Trading Philosophy

ALSO "Trading Capital Management"



Options Trade - - Insperity Inc (NYSE: NSP) Calls

Thursday, August 16, 2018

** OPTION TRADE: Buy NSP SEPT 21 2018 115.000 CALL at approximately $2.00. Sell price is left to your own judgment.

(or alternatively : Place a pre-determined sell at $4.00.

Also include a protective stop loss of $0.80.)

Insperity Inc (NYSE: NSP), providing human resources (HR) and business solutions to enhance business performance for small and medium-sized businesses in the United States, reported strong second-quarter 2018 results, wherein both earnings and revenues surpassed the Consensus Estimate.

Adjusted earnings of 68 cents per share surpassed the consensus mark by 8 cents and increased a massive 65.9% year over year. The bottom line gained from double-digit worksite employee growth, solid improvement of gross profit and strategic management of operating costs. The bottom line also surpassed the guided range of 59-63 cents per share.

Total revenues of $922.3 million beat the consensus mark by $17.4 million and increased 15.9% year over year. The top line benefited from a 13.1% increase in average number of worksite employees paid per month and 2.4% increase in revenues per worksite employee per month. Average number of worksite employees paid per month was 203.9 million and revenue per worksite employee per month came in at $1,507.

So far this year, shares of Insperity have gained 83.5%, significantly outperforming the 11.6% rise of the industry it belongs to.

Influencing Factors

In the quarter, the double-digit worksite employee growth was driven by strength across new client sales (increased sales activity in mid-market segment), higher client retention (totaled over 99%) and rise in net hiring of worksite employees by the company's client base (hiring of Business Performance Advisors to boost core client segment growth).

Insperity has been an outperformer where the company's price trend reveals that the staffing services stock has had an impressive run.

Insperity has an impressive earning surprise history. The company's earnings surpassed the Consensus Estimate in all the previous five quarters, delivering an average positive earnings surprise of 20%.

Improvement in client retention rates drives Insperity's revenues. The company has been taking several initiatives in the form of designed solutions catering to the requirement of each of its client segments (small, emerging gross and mid-market clients).

Additionally, launch of Insperity Premier, a HCM technology platform designed to facilitate the co-employment relationship, gained popularity among the company's clients.

Insperity's growing cash position implies management's efficient execution in recent times. In 2017, the company had cash and cash equivalents of $354.3 million, which compares favorably with $286 million and $269.5 million of cash and cash equivalents, respectively in 2016 and 2015. The significant amount of cash provides it the flexibility to pursue any growth strategy.

Moving Forward…..

Insperity raised its guidance for 2018. The company now projects adjusted earnings between $3.49 per share and $3.53 per share, implying growth of 42.4-44.1%, above the previously guided range of $3.36-$3.44 per share. The Consensus Estimate is pegged lower at $3.41.

Adjusted EBITDA is projected to grow 26.6-28.9% to a range of $225-$229 million. The prior guided range was $218 million to $223 million.

Average WSEs are expected to be in the 207,400 to 209,200 bracket, representing 13.5-14.5% growth. The earlier expected range was between 206,400 and 208,400.

Effective tax rate is anticipated to be around 26%.

Insperity is also focusing on its Workforce Administration solution, which provides human capital management and payroll services solution. By having Workforce Administration as the prime element of its next five-year plan, the company plans to offer the same as the most integrated traditional employment solution in the market. Insperity is highly optimistic about the growth opportunities arising from Workforce Administration and Workforce Optimization.

Analysts and Hedge Funds Opinions

Insperity was upgraded by Zacks Investment Research from a “hold” rating to a “buy” rating in a research note issued to investors on Tuesday, August 7th. The firm currently has a $119.00 target price on the business services provider’s stock. Zacks Investment Research‘s price target would suggest a potential upside of 6.97% from the stock’s current price.

According to Zacks, “Insperity reported strong second-quarter 2018 results, with both earnings and revenues beating the Zacks Consensus Estimate. The company is well poised to benefit from the booming professional employer organization (PEO) industry, driven by growth opportunities arising from Workforce Administration and Workforce Optimization solutions. Improvement in client retention rates drives Insperity’s revenues. The company outperformed the industry in the past year. However, Insperity’s operation in a highly fragmented and competitive PEO industry remains a concern. The company’s earnings are highly seasonal in nature due to changing trends in medical claims costs and payroll taxes. Medical claims costs tend to rise throughout the year, with the highest cost incurred in the fourth quarter. Such high costs negatively impact Insperity’s fourth-quarter earnings.”

Also, Insperity had its price target increased by Roth Capital from $88.00 to $123.00 in a report published on Wednesday, August 1st. The firm currently has a buy rating on the business services provider’s stock.

Insperity Inc has an analyst consensus of Moderate Buy, with a price target consensus of $117.33, which is a 12.6% upside from current levels. Summary

Insperity looks strong on the back of a booming professional employer organization ("PEO") industry

Insperity Inc has a market cap of $4.65 billion, a P/E ratio of 54.36, and a P/E/G ratio of 1.95 and a beta of 0.80. Insperity Inc has a 12-month low of $39.25 and a 12-month high of $113.20. The company has a debt-to-equity ratio of 0.89, a quick ratio of 1.15 and a current ratio of 1.15.


Options Trade - - Marriott International Inc. (NASDAQ:MAR) Calls

Tuesday, August 14, 2018

** OPTION TRADE: Buy MAR SEPT 21 2018 125.000 CALL at approximately $1.30 TO $1.40. Sell price is left to your own judgment.

(or alternatively : Place a pre-determined sell at $2.60.

Also include a protective stop loss of $0.55.)

Marriott International, Inc. (NASDAQ:MAR) solid brand position, sizeable international exposure, Starwood acquisition and rising demands for hotels in international markets are likely to boost its quarterly performance. Marriott International is the world's largest hotel company with brands like Ritz-Carlton, Renaissance Hotels and Fairfield Inn & Suites, among many others. All of this from a single root beer stand founded in 1906 by John Willard Marriot and his wife, Alice Sheets Marriott.

The stock has gained 21.4% compared with the industry’s 3.1% growth.

Marriott International has strengthening consumer purchasing power right now and is well positioned to profit from it. As the largest hotel company in the world - it has been since it bought Starwood Hotels and Resorts in 2016 - it stands to benefit from both consumer and business spending. Its hotels, ranging from all of the various Marriott hotels to Ritz-Carlton, Sheraton and Westin, not to mention a vacation club and longer-term lodging for business travelers, are everywhere.

There is more upside expected despite the slight bump in the road from its latest earnings results. For the second quarter, the company missed on revenue and issued a forecast for one key hotel metric below expectations. Still, there was a lot of good in the report.

Marriott stock earned $1.73 a share, ahead of estimates of $1.36. Revenue of $5.35 billion was shy of expectations of $5.99 billion.

Influencing Factors

Marriott continues to impress investors with its impressive bottom-line performance. In second-quarter 2018, the company's adjusted earnings per share came in at $1.73, which surpassed the Consensus Estimate of $1.36 and increased 56% year over year. Notably, Marriott's earnings have topped the consensus mark for the 16 straight quarters. Strong RevPAR gains and room growth drove the company's results.

Marriott's consistent efforts to expand its presence worldwide and capitalize on the demand for hotels in international markets are also encouraging. Moving ahead, the company plans to significantly expand its global portfolio of luxury and lifestyle brands.

The hotel company is also trying to expand its footprint outside the United States, especially in Asia, Latin America, Middle East and Africa.

Meanwhile, the company's European pipeline has grown consistently in the recent past and is expected to continue, going forward. In fact, Marriott aims to expand its lead in the luxury and full-service segments in the region, have the largest portfolio in the upscale division and also win over millennials in the affordable lifestyle group by 2020.

On the international front, the company continues to rely on acquisitions in order to expand its footprint. In 2016, it completed the acquisition of Starwood and became the world's largest hotel company.

Digital innovations and social media are starting to play an increasingly important role in hotel bookings. Social media enhances the brand's prospects by connecting directly with guests, which in turn can lead to increased loyalty and market share.

Earlier, Marriott had announced its plans to unify its loyalty program benefits across Marriott Rewards, The Ritz-Carlton Rewards and Starwood Preferred Guest (SPG) in August.

Moving Forward…..

Looking ahead, management expects revenue per available room (or revPAR) to increase 1.5%-2% this quarter, which is below the expected growth for the full year because the July 4 holiday came in the middle of the week, which reduced bookings. It also doesn't help that comparisons to last summer are tough because more rooms were booked then due to multiple hurricane relief efforts going on. Still, full-year expectations for revPAR to increase 3%-4% were unchanged, which is important.

Plus, full-year earnings guidance was actually raised from $5.43-$5.55 a share to $5.81-$5.91 a share, all of which was above the Street's expectations of $5.55. Earnings growth for the current quarter and current year are still expected to be 25%-plus.

Analysts and Hedge Funds Opinions

Morgan Stanley cut their target price on Marriott International from $143.00 to $138.00 and set an “equal weight” rating on the stock in a research note on Wednesday, August 8th.

Several analysts have recently commented on the company…..

  • Jefferies Financial Group initiated coverage on shares of Marriott International in a research report on Thursday, May 31st. They issued a “hold” rating and a $152.00 price objective for the company.
  • Morgan Stanley lowered shares of Marriott International from an “overweight” rating to an “equal” rating and set a $129.00 price objective for the company in a research report on Tuesday, July 24th.
  • Robert W. Baird reissued a “hold” rating and issued a $138.00 price objective on shares of Marriott International in a research report on Thursday, April 19th.
  • Zacks Investment Research lowered shares of Marriott International from a “hold” rating to a “sell” rating in a research report on Wednesday, July 18th.
  • Finally, Deutsche Bank reissued a “hold” rating and issued a $141.00 price objective on shares of Marriott International in a research report on Thursday, May 10th.

One research analyst has rated the stock with a sell rating, eleven have given a hold rating and five have issued a buy rating to the company’s stock. The stock presently has a consensus rating of “Hold” and an average target price of $139.54.

Insider News……

Marriott Director Frederick A. Henderson bought 1,640 shares of the firm’s stock in a transaction that occurred on Thursday, August 9th. The stock was purchased at an average cost of $120.84 per share, with a total value of $198,177.60. Following the completion of the transaction, the director now directly owns 1,640 shares in the company, valued at $198,177.60.

Summary

The company continues to grow, and the post-earnings dip is a great opportunity to buy in at discounted prices. Over time, Marriott stock is heading to $175 or higher.

Marriott has a quick ratio of 0.49, a current ratio of 0.48 and a debt-to-equity ratio of 2.95. The company has a market capitalization of $41.69 billion, a PE ratio of 27.81, a PEG ratio of 1.80 and a beta of 1.37. Marriott International has a 1-year low of $96.90 and a 1-year high of $149.21.


Options Trade - - Tapestry Inc (NYSE: TPR) Calls

Monday, August 13, 2018

** OPTION TRADE: Buy TPR SEPT 21 2018 50.000 CALL at approximately $1.20 TO $1.30. Sell price is left to your own judgment.

(or alternatively : Place a pre-determined sell at $2.40.

Also include a protective stop loss of $0.50.)

Tapestry Inc (NYSE: TPR) - created when Coach and Kate Spade merged – will report earnings tomorrow, before the market opens. The report will be for the fiscal Quarter ending Jun 2018. Based on 12 analysts' forecasts, the consensus EPS forecast for the quarter is $0.56. The reported EPS for the same quarter last year was $0.50.

Tapestry, the maker of high-end shoes and handbags, has an established record of topping earnings estimates, especially when looking at the previous two reports. The company boasts an average surprise for the past two quarters of 16.21%.

For the most recent quarter, Tapestry was expected to post earnings of $0.50 per share, but it reported $0.54 per share instead, representing a surprise of 8%. For the previous quarter, the consensus estimate was $0.86 per share, while it actually produced $1.07 per share, a surprise of 24.42%.

With this earnings history in mind, recent estimates have been moving higher for Tapestry. In fact, the Earnings ESP (Expected Surprise Prediction) for the company is positive, which is a great sign of an earnings beat.

Tapestry currently has an Earnings ESP of +0.53%, which suggests that analysts have recently become bullish on the company's earnings prospects. This positive Earnings ESP indicates that another beat is possibly around the corner.

Influencing Factors

In June, UBS analysts started coverage of the Barron’s Next 50 company with a “buy” rating and a $62 price target, saying they thought investors would end up “viewing Tapestry as a leading company in a healthy category.”

The analysts believe the Coach brand remains strong, its competitive position will improve, and Kate Spade could improve profitability through cost savings.

Analysts and Hedge Funds Opinions

Canaccord Genuity analyst Camilo Lyon reiterated a Buy rating on Tapestry Inc (NYSE: TPR) Saturday and set a price target of $55. The company’s shares closed on Friday at $47.93.

Piper Jaffray analyst Erinn Murphy reiterated a Buy rating on Tapestry Inc recently and set a price target of $58.

In a report issued on July 25, Robert W. Baird also reiterated a Buy rating on the stock with a $58 price target.

In a report issued on July 31, UBS also reiterated a Buy rating on the stock with a $59 price target.

Several analysts have recently commented on the company…..

  • Deutsche Bank raised their target price on Tapestry to $64.00 and gave the stock a “buy” rating in a research note on Thursday, April 19th. They noted that the move was a valuation call.
  • Buckingham Research initiated coverage on Tapestry in a research report on Friday, April 20th. They set a “buy” rating and a $62.00 price target for the company.
  • Oppenheimer increased their price objective on Tapestry from $60.00 to $65.00 in a report on Monday, April 30th.
  • Guggenheim reiterated a “buy” rating and issued a $65.00 price objective on shares of Tapestry in a report on Friday, April 27th.
  • Zacks Investment Research upgraded Tapestry from a “hold” rating to a “buy” rating and set a $60.00 price target for the company in a research report on Friday, April 20th.
  • Finally, Wells Fargo & Co set a $60.00 price target on Tapestry and gave the stock a “buy” rating in a research report on Monday, April 23rd.

One analyst has rated the stock with a sell rating, seven have issued a hold rating and twenty-three have assigned a buy rating to the company’s stock.

Tapestry Inc has an analyst consensus of Strong Buy, with a price target consensus of $57.83, a 20.7% upside from current levels.

Summary

Tapestry has a current ratio of 2.66, a quick ratio of 1.83 and a debt-to-equity ratio of 0.51. Tapestry has a 1-year low of $38.70 and a 1-year high of $55.50. The stock has a market cap of $13.37 billion, a price-to-earnings ratio of 21.64, and a P/E/G ratio of 1.46 and a beta of 0.40.






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