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, 6th October, 2016
Delta Air Lines, Inc. (NYSE:DAL) Calls
**OPTION TRADE: Buy the DAL OCT 21 2016 40.000 call at approximately $1.30. Sell price is left to your own judgment.
Delta Air Lines, Inc. (NYSE:DAL), one of the oldest operating airlines, is looking strong, and the chart is just breaking out on good turnover. A series of higher highs, higher lows since the Brexit low is a bullish condition. The stock is overbought and the relative strength is impressive, a sharp slope upward.
Also, the Atlanta-based airline yesterday reported a narrower-than-expected decline in consolidated passenger unit revenue for the month of September.
Passenger unit revenue fell 3% last month, while the company had predicted it would decrease 7%.
Delta Air Lines is expected to announce its 3Q16 earnings on October 12, 2016.
In the last fiscal quarter alone, Delta Air Lines, Inc. generated nearly $10.45B in sales and net income of $1.47/share. That compares with the mean forecast $10.49B and $1.42/share, respectively. For the prior quarter revenue for the stock hit $9.25B.
The stock is overbought and the relative strength is impressive, a sharp slope upward. The gap from July has now been filled; the 200-day moving average is the next resistance at $42.44, followed by the May highs around $44 or so.
All analysts maintained their “buy” recommendations for the current quarter. Only one analyst has downgraded the airline from a “buy” rating to a “hold” rating.
Delta Air Lines Inc. has been given a $54.00 price objective by equities researchers at Buckingham Research in a research report issued on Wednesday. The firm presently has a “buy” rating on the stock. Buckingham Research’s target price suggests a potential upside of 34.50% from the company’s previous close.
Delta Air Lines stock’s 50-day moving average is $37.74 and its 200 day moving average is $40.69. Delta Air Lines has a 52 week low of $32.60 and a 52 week high of $52.77. The company has a market capitalization of $30.52 billion, a PE ratio of 6.558 and a beta of 0.95.
Wednesday, 5th October, 2016
Barrick Gold Corporation (USA) (NYSE:ABX) Calls
**OPTION TRADE: Buy the ABX OCT 21 2016 16.000 call at approximately $0.50. Sell price is left to your own judgment.
Commodities such as precious metals tend to do well in weaker dollar markets, and while gold has traded higher over the past year, a substantial drop in the dollar has some saying that the $1,500 an ounce level is not out of the question. A new research report from Deutsche Bank says it is time to increase precious metal exposure. With Tuesday’s massive sell-off in gold, the time to add this options trade looks even better.
Despite this technical breakdown Tuesday, Barrick Gold Corporation (USA) (NYSE: ABX) continues to be a favorite of Wall Street, including S&P’s mining analyst. Standard & Poor’s has a four-star buy on the stock with a target of $25.
Barrick Gold Corp is one of the world’s largest gold companies in terms of both production and in-the-ground reserves, producing and selling gold and copper. The company is also involved in exploration and mine development activities in various countries, including the United States, Canada, Australia, Argentina, Chile, Peru, the Dominican Republic, Papua New Guinea, Tanzania, Zambia, and Saudi Arabia.
As of December 31, 2014, the company had proven and probable mineral reserves of 93.0 million ounces of gold and 9.6 billion pounds of copper.
Its ability to reduce costs and debt by $2 billion in 2016 and by more than $3 billion in 2015 has reduced its debt to just a few major bond maturities through 2021.
In addition, management has stated that the company is positioned to be cash-flow-positive at gold prices as low as $1,000 per ounce. S&P estimates an EPS of 75 cents in 2016 and $1 in 2017.
Deutsche Bank has pointed out in the past that Barrick is the world’s largest gold mining company, it also has exposure to copper and silver and it holds interests in a nickel project in the Democratic Republic of Congo. Last year the company slashed the dividend and continues on a strong cost-cutting course that includes the sale of its Australian Cowal gold mine for $550 million to the Australia-based Evolution Mining. The company generated $471 million in free cash flow (FCF) in 2015, its first positive FCF in the past four years.
The Deutsche Bank price target for the stock is $22, and the stock was lifted to Buy from Hold and is the top pick. The Wall Street consensus target price is $23.21. Shares closed most recently at $15.45, down over 11% on the day.
Wednesday, 5th October, 2016
McCormick & Company, Incorporated (NYSE:MKC) Calls
**OPTION TRADE: Buy the MKC OCT 21 2016 100.000 call at approximately $0.50. Sell price is left to your own judgment.
McCormick & Company, Incorporated (NYSE: MKC), a manufacturer, marketer and distributer of spices, seasoning mixes, condiments and other flavorful products to the food industry, including retailers, food manufacturers and foodservice businesses, advanced on Friday as the company reported a strong quarter that was full of positives. Sales grew 6% on a constant currency basis (in line with estimates), and EPS beat $0.09. Management raised full-year EPS guidance on a constant currency basis by 12-13%.
The acquisitions of Stubbs and Gourmet Garden added 2 percentage points of growth, but MKC continued to generate strong organic growth through product innovation, marketing, and pricing. MKC is taking the steps it needs to in order to overcome one of the biggest challenges facing its business, and we are optimistic the company can achieve similar organic growth over the next four years.
Since reporting MKC has pulled back and is now providing a nice entry price for this options trade.
Why McCormick & Co?
Thanks to its market leadership position, MKC can better withstand the pressures weighing on the spices and seasoning industry. MKC has 20% market share, more than 4 times as much as the next largest competitor, and has the financial resources and scale to outspend its rivals on marketing and R&D. MKC has spent an average of 7% of sales on branding and R&D over the past five years, and because the company can spread these fixed costs across higher volumes, these investments are more economical than they would be for smaller competitors.
Furthermore, MKC can mitigate the pressure on volumes by raising prices. The firm's broad portfolio of leading brands makes the company a critical supplier for retailers and gives MKC pricing power.
McCormick & Co. has a 50 day moving average price of $99.37 and a 200-day moving average price of $99.28. McCormick & Co. has a 52 week low of $78.45 and a 52 week high of $107.84. The company has a market capitalization of $12.30 billion, a price-to-earnings ratio of 26.86 and a beta of 0.47.
Overall, McCormick is focusing on building sales through acquisitions, and expects strong sales momentum to continue in fiscal 2016. Its cost saving initiative is also appealing.