“Cut-to-the-Chase” Recommendations
- Week Beginning -
Monday, October 23, 2017

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 - Under Armour Inc. (NYSE:UAA) Puts

Friday, October 27, 2017

** OPTION TRADE: Buy the UAA NOV 17 2017 15.000 PUT at approximately $0.40.

Sell price is left to your own judgment.

Baltimore-based athletic apparel and accessories maker Under Armour Inc. (NYSE:UAA) is scheduled to report third-quarter 2017 results on Oct 31, before the opening bell.

The Consensus Estimate for the quarter is pegged at 19 cents down from 29 cents reported in the year-ago period. Notably, the estimates have witnessed downward revisions in the last 30 days. Analysts expect revenues of $1,490 million for the said quarter, up about 1.2% from the year-ago quarter.

Under Armour has been under pressure for the last two years. Its stock peaked in 2015 and then continued to project big sales increases that never seem to materialize.

Under Armour Inc. fell 3% on Monday following news that the firm is considering an exit from its tennis and outdoor business; while longtime executive Kip Fulks will take a sabbatical from the company.

Trading down another 2.3% on Tuesday morning at $16.46, UAA stock reflects a whopping 43.4% decline year-to-date (YTD) versus the SP 500’s 14.7% gain over the same period. In response to the news, one team of analysts on the Street suggests that the athleisure player’s real problem is its many distributors, rather than too many product offerings.

Earlier this year, Under Armour reported its first loss as a public company, as shares fell to a five-year low after reporting second-quarter earnings in August. As the firm tries to revive its business in an increasingly competitive sportswear space against Nike Inc. and revived German rival Adidas AG, sources tell The Wall Street Journal that the company is considering trimming down and getting rid of its smaller businesses.

Influencing Factors

The stock has been hurt by rumors of product delays, which has forced the company to ship via air freight certain footwear styles to meet its delivery schedules. Air freight is significantly more expensive and should wreck margins this quarter. Because Under Armour carries lower-than-average footwear margins, profits in the shoe business could be non-existent.

Furthermore, Under Armour is experiencing the same type of sales pressure in the athletic apparel business that Nike is seeing. Management already chopped 100 basis points out of their guidance on apparel margins, so anything more than 100 basis points will be a huge disappointment from investors.

While strong international sales may boost Under Armour's prospects, the company still derives 80% of its sales from North America. And for the company to make its full-year guidance, it needs a huge fourth quarter. For the third quarter, analysts are forecasting sales will increase just 1%, but next quarter sales need to jump 23% to hit its full-year revenue estimate of $5.2 billion – which is not likely.

Analysts and Hedge Funds Opinions

In a note to clients Monday, Susquehanna Financial Group footwear analyst Sam Poser recommends selling UAA, “a brand in peril,” as he foresees “the decision to open distribution to the moderate channel coupled with the lack of compelling lifestyle product” as resulting in “further brand erosion and margin pressure.” The analyst indicates that Under Armour does not currently have the product breadth required to allow for proper segmentation in the moderate channel without hurting its business at its most “brand appropriate” customers, including Dick’s Sporting Goods Inc. , Hibbett Sports Inc., Academy and Modells. Poser also notes that promotional activity from NKE is set to put further pressure on Under Armour’s sales and margins.

Susquehanna indicates that the strength of Under Amour’s brand requires that the firm pull out of its new moderate channel business at DSW Inc., Kohl’s Corp. and Famous Footwear.

“We are hopeful that UAA management will do what is right for the long-term health of UAA. Unfortunately, don't see any signs that a pullback in distribution will occur. Hence, the 'brand appropriate' retailers are either shrinking their UAA business and/or discounting UAA product. As a result, we believe Street numbers are too high and UAA will miss its implied 2H17 EBIT & EPS guidance of $277M-$297M & $0.40-$0.43,” wrote Poser.

Several other analysts have also recently commented on the company…..

  • Vetr downgraded Under Armour from a “hold” rating to a “sell” rating and set a $16.78 price target for the company. in a report on Thursday, September 7th.
  • Deutsche Bank AG downgraded Under Armour from a “hold” rating to a “sell” rating and lowered their price target for the stock from $20.27 to $17.00 in a report on Tuesday, July 25th.
  • Zacks Investment Research downgraded Under Armour from a “hold” rating to a “sell” rating in a report on Wednesday, October 11th.
  • Stifel Nicolaus reissued a “hold” rating and issued a $18.00 price target on shares of Under Armour in a report on Thursday, August 24th.
  • Finally, Buckingham Research reissued an “underperform” rating and issued a $15.00 price target on shares of Under Armour in a report on Thursday, July 27th.

Fourteen investment analysts have rated the stock with a sell rating, twenty-one have issued a hold rating and five have issued a buy rating to the company’s stock. The company currently has a consensus rating of “Hold” and an average price target of $19.61.

Summary

Under Armour is just too dependent on one shoe launch (Stephan Curry's Curry 4) in an industry that is struggling with high inventory and weak average selling prices. The Curry 4 launches on Friday with a retail price of $130. The Curry 3 was priced at $140 and was mocked as a "golf shoe." Sneaker fans called the Curry 2 a "grandpa shoe" or a "nurse shoe." That's not exactly comforting when you are forecasting a 23% increase in revenue.

Under Armour has a 50-day moving average price of $16.80 and a 200-day moving average price of $18.98. Under Armour has a 12 month low of $15.75 and a 12 month high of $33.45. The stock has a market cap of $7.22 billion, a price-to-earnings ratio of 33.16 and a beta of -0.02.


Option Trade - Mattel, Inc. (NASDAQ:MAT) Puts

Thursday, October 26, 2017

** OPTION TRADE: Buy the MAT NOV 17 2017 15.000 PUT at approximately $0.60. Sell price is left to your own judgment.

Leading toy-maker, Mattel, Inc. (NASDAQ:MAT) is scheduled to report third-quarter 2017 results today, October 26, after the market closes. Analysts expectED Mattel to post earnings of $0.62 per share for the quarter. But estimates have changed recently: based on 6 analysts' forecasts, the consensus EPS forecast for the quarter is $0.56. The reported EPS for the same quarter last year was $0.70.

Mattel’s last quarterly earnings results saw the company report ($0.14) earnings per share for the quarter, missing analysts’ consensus estimates of ($0.09) by ($0.05). The company had revenue of $974.50 million during the quarter, compared to analyst estimates of $972.36 million.

Monday was a discouraging day for the toy makers after Hasbro warned that the holiday period would have a bad effect on its sales growth because of key retailer Toys "R" Us declaring bankruptcy. Mattel couldn't help but feel the burn of the news.

Consumer spending uncertainty in the United States as customers restrain their non-essential purchases, along with overall challenging macroeconomic environment are a threat to Mattel's top-line growth.

Yet, Mattel's continual efforts to improve point of sale through launch of new products along with its incremental licensed entertainment portfolio are unlikely to drive third-quarter results. Also, increased focus on building its Power Brands (American Girl, Barbie, Fisher-Price, Hot Wheels and Thomas & Friends) into 360-degree connected systems of play and experiences are not anticipated to bolster results in the to-be-reported quarter.

Mattel has been losing its business to rival companies. The company has suffered nearly 5% annual decline in revenues over the past four years since its efforts have failed to win back customers. The stock is down more than 43% so far this year as a result of continued pressure on profitability during the first half of 2017.

Also, the poor marketing strategies have played a role in Mattel’s downfall despite 10% of total sales spending on advertising and promotions.

Despite some steep decline in share price, Mattel is still a risky company due to its extremely weak fundamentals and uncertain sales outlook.

The more focused innovation and marketing efforts under the leadership of Margo Georgiadis have the potential to revive profitable growth over the long run. However, the short-term sales headwinds and infirm cash flow position due to weak margins will continue to weigh on the stock price, as the revamped turnaround plan will take some time to bear fruits.

Influencing Factors

Mattel, Inc. saw a significant growth in short interest in the month of September. As of September 29th, there was short interest totaling 63,072,066 shares, a growth of 31.8% from the September 15th total of 47,859,480 shares. Approximately 18.5% of the shares of the stock are short sold. Based on an average daily trading volume, of 10,510,004 shares, the short-interest ratio is currently 6.0 days.

Note that the Toys "R" Us bankruptcy filed in September is likely to impact Mattel's revenues and operating profit in the to-be-reported quarter as the retailer makes up a sizeable portion of Mattel's sales.

Meanwhile, the company expects continued gross margin headwinds in the second-half of 2017, given lower licensing income. Also, note that Mattel plans to make incremental investments in order to drive growth and margin improvement. Though the investments are set to reap benefits in the long term, it may pressurize the company's margins in the quarter.

Also, foreign currency fluctuation remains a cause of concern owing to the company's widespread global presence.

Further, the estimates have revised 13.8% downward over the past 60 days. The Consensus Estimate for third-quarter earnings of 56 cents reflects a decline of 20.2% year over year.

At the Mattel Girls & Boys Brands, performance of the Other Girls brand has been a matter of concern for long, given declines in Monster High and Ever After High sales. This quarter is no exception. In fact, the Consensus Estimate of $136 million for worldwide gross sales for this brand reflects a decrease of 16% year over year.

Gross sales at Construction and Arts & Crafts Brands that include the Mega Bloks and RoseArt brands might drop in the quarter, given declines in Mega Bloks licensed products. The Consensus Estimate for the same is pegged at $115 million, reflecting a year-over-year decrease of 1.4%.

The company has also not been able to fully regain its loss of momentum in American Girl Brands and needs to do a lot to capture the full potential of this incredible brand. In fact, the brand has been posting disappointing performance in the last two quarters and is expected to continue doing so in the to-be-reported quarter. The Consensus Estimate for segment's gross sales of $115 million reflects a decline of 8.7% year over year.

Mattel also recently shelved the Aristotle, a smart speaker and baby monitor that was specifically designed with kids in mind. The multi-functional speaker could be programmed to tell bed-time stories and teach the ABC's, as well as live-stream encrypted video to a smartphone. As good as it sounded, child advocates were upset and sent a letter to Mattel CEO Margaret Georgiadis that stated, "Children shouldn't be encouraged to form bonds and friendships with data-collecting devices." Mattel announced that it would "not to bring Aristotle to the marketplace as part of an ongoing effort to deliver the best possible connected product experience to the consumer" and that the Aristotle did not "fully align with Mattel's new technology strategy."

Analysts and Hedge Funds Opinions

Mattel, Inc. had its price objective cut by equities research analysts at Stifel Nicolaus from $19.00 to $17.00 in a report released on Thursday, October 12th. The brokerage currently has a “hold” rating on the stock.

Several other analysts have also recently commented on the company…..

  • Jefferies Group LLC reaffirmed a “hold” rating and issued a $17.00 target price on shares of Mattel in a report on Thursday, September 7th.
  • UBS AG reaffirmed a “buy” rating and set a $26.00 price objective (down previously from $29.00) on shares of Mattel in a research note on Wednesday, June 21st.
  • Monness Crespi & Hardt boosted their price objective on shares of Mattel from $22.00 to $27.00 and gave the company a “buy” rating in a research note on Wednesday.
  •  Finally, BidaskClub raised shares of Mattel from a “strong sell” rating to a “sell” rating in a research note on Thursday, September 14th.

Mattel, Inc. has been given a consensus recommendation of “Hold” by the sixteen analysts that are currently covering the company. Two analysts have rated the stock with a sell rating, six have given a hold rating, six have issued a buy rating and one has issued a strong buy rating on the company.

Summary

Mattel is trading at a forward price to earnings multiple of 16.4x based on consensus earnings estimate of $0.96 per share for the fiscal year 2018. Mattel is still comparatively a risky stock due to extremely weak fundamentals. Mattel’s operating and EBITDA margins are hovering at -4.0% and 1.28% despite some sequential improvements during the second quarter of 2017.

Mattel continues to face headwinds in the domestic market, which makes more than half of the company's total business.

Mattel has a market capitalization of $5.39 billion, a P/E ratio of 22.17 and a beta of 0.86. Mattel has a one year low of $14.35 and a one year high of $33.23. The firm has a 50 day moving average of $15.56 and a 200 day moving average of $20.02.


Option Trade - Intel Corporation (NASDAQ:INTC) Calls

Wednesday, October 25, 2017

** OPTION TRADE: Buy the INTC NOV 17 2017 41.000 CALL at approximately $0.85.

Sell price is left to your own judgment.

Intel Corporation (NASDAQ:INTC), a designer and manufacturer of digital technology platforms, a large-cap value stock and member of the Dow Jones Industrial Average, is set to report its Q3 earnings on Thursday. Intel is expected to post earnings of 80 cents per share whereas the Earnings Whisper number is $0.82 per share, and revenues of $15.71 billion in its third-quarter, based on the latest consensus estimates. The company has met or surpassed earnings estimates in each of the trailing 14 quarters. Overall earnings estimates have been revised higher since the company's last earnings release.

And though shares of Intel have gained only 12.57% this year, which is less than the S&P 500 and well below the industry's average gain, the stock does currently rest firmly near its 52-week high.

Fiscal 3Q is a seasonally strong quarter for Intel because back-to-school season drives PC sales, and new flagship phones drive mobile modem sales. Intel expects its fiscal 3Q17 revenue to grow 6% sequentially to $15.7 billion.

These lofty heights can be attributed to Intel's 15% climb over the last 12-weeks, including a nearly 10% gain in the last month alone.

Yet, for the full-year, Intel is expected to post earnings growth of 10.7% and revenue growth of 3.3%.

Influencing Factors

Intel has turned some of its focus towards the Internet of Things. This strategic move is aimed to help improve both the company's top and bottom line, especially as the world of internet-connected products, from cars to refrigerators, proliferates.

The semiconductor maker designs an assortment of IoT products used in the retail and transportation industries, as well as in the development of connected smart cities. Based on latest consensus estimates, Intel's IoT revenues are set to jump 12% to reach $772 million this quarter.

Intel recently launched its eighth-generation Core processors, which should lift the company's gaming endeavors.

And on top of this, the Client Computing Group has been a surprise performer for Intel this year. In fact, in the second quarter, Intel posted revenues of $8.21 billion in this unit. Those results smashed the consensus estimate of $7.82 billion and marked year-over-year growth of nearly 12%.

Intel's Data Center business accounts for nearly half of the company's operating margin; the company expects Data Center segment revenue, which includes cloud computing and large servers, will grow 15% through 2018.

Based on current consensus estimates, it is expected that Intel's Data Center Group revenues will climb over 6% in Q3, from $4.54 billion to $4.82 billion. The company's enterprise-focused segment has grown as the demand for data storage and high-performance networks has increased exponentially.

As the number of smartphones and internet-connected devices grows, coupled with the rise of artificial intelligence and cloud computing, Intel's Data Center business will expand.

Analysts and Hedge Funds Opinions

ValuEngine upgraded shares of Intel Corporation from a hold rating to a buy rating in a research report sent to investors recently.

Several other analysts have also recently commented on the company…..

  • Zacks Investment Research upgraded shares of Intel Corporation from a “hold” rating to a “buy” rating and set a $39.00 target price for the company in a research report on Wednesday, September 6th.
  • Vetr upgraded shares of Intel Corporation from a “buy” rating to a “strong-buy” rating and set a $41.56 target price for the company in a research report on Thursday, August 24th.
  • Credit Suisse Group restated an “outperform” rating on shares of Intel Corporation in a research report on Thursday, August 31st.
  • B. Riley reaffirmed a “buy” rating and set a $46.00 price objective on shares of Intel Corporation in a report on Friday, July 28th.
  • Hilliard Lyons started coverage on shares of Intel Corporation in a report on Wednesday, July 12th. They set a “buy” rating and a $41.00 price target for the company.
  • Robert W. Baird reissued an “outperform” rating and set a $42.00 price target on shares of Intel Corporation in a report on Thursday, July 13th.
  • Finally, BidaskClub upgraded shares of Intel Corporation from a “sell” rating to a “hold” rating in a research report on Tuesday, August 1st.

Five investment analysts have rated the stock with a sell rating, fifteen have issued a hold rating, twenty-four have given a buy rating and one has assigned a strong buy rating to the company. The stock currently has an average rating of “Hold” and a consensus target price of $43.24.

Summary

In the last three months, especially after its second quarter earnings Intel stock has seen a strong bullish rally. Intel stock is up over 18% in the last three months. Intel stock has strong momentum going into its third quarter earnings.

Intel Corporation has a one year low of $33.23 and a one year high of $40.45. The company has a market capitalization of $189.98 billion, a P/E ratio of 15.43 and a beta of 1.07. The company’s 50-day moving average is $37.91 and its 200 day moving average is $36.09.


Option Trade - Microsoft Corporation (NASDAQ:MSFT) Calls

Tuesday, October 24, 2017

** OPTION TRADE: Buy the MSFT NOV 17 2017 80.000 CALL at approximately $1.30.

Sell price is left to your own judgment.

Microsoft Corporation (NASDAQ:MSFT), the tech titan, will report earnings Thursday, October 26, 2017, after the market closes. The consensus earnings estimate is $0.73 per share on revenue of $23.59 billion and the Earnings Whisper number is $0.76 per share. Investor sentiment going into the company's earnings release has 83% expecting an earnings beat. Consensus estimates are for earnings to decline year-over-year by 3.95% with revenue increasing by 15.34%.

Since the company's last earnings release while the stock has drifted higher by 7.3% from its open following the earnings release to be 14.0% above its 200 day moving average of $69.13. Overall earnings estimates have been revised lower since the company's last earnings release.

Microsoft's free cash flow over the past 12 months is $31.4 billion, with nearly $133 billion in cash, cash equivalents, and short-term investments.

Microsoft's dividend yield currently stands at 2.16%. Over the past five years, the company has boosted its dividend by more than 80%. The prospects of more dividend increases down the road seem pretty good: Microsoft's payout ratio is around 56%.

Microsoft's share price is up an impressive 27% in 2017. And over the past five years, Microsoft's performance has trounced Apple's.

Microsoft has a strong history of beating Wall Street estimates, having beaten consensus revenue/earnings estimates in 7 of the last 8 quarters. Looking at the more recent earnings history, the company has beaten the top end of Wall Street estimates in two of the last four quarters. Especially, the last quarter EPS beating the high-end estimate by a big 25.64%, implying that Wall Street is yet to warm up to the recent turnaround growth the company currently finds itself in.

On the revenue front, the company has just missed the estimates only once in the last 8 quarters. The strong earnings history implies that Microsoft could be in for yet another earnings beat. The case for an earnings beat is also supported by the current MSFT Q1 earnings whisper number, which is currently at $0.76, implying a 4 cent beat.

Influencing Factors

Until a few years ago, Microsoft looked like it was on the cusp of a substantial decline based on a worldwide slowdown in PC sales. Now, after Microsoft proved it could adapt amid the changing tech world through new ventures like Azure and Office 365, the company looks ready to continue its current run of success.

The company proved it was able to buck the negative PC sales trend in part by adopting a "freemium" model for Windows 10. On top of that, Microsoft turned its attention to Office 365 and Azure in order to bolster its future-looking businesses and renew investor confidence.

Microsoft's Productivity & Business Processes unit has experienced a significant amount of growth recently, and this unit will now benefit from the company's acquisition of LinkedIn, which closed in December 2016. On top of that, Office 365-a spin on its core suite of software that includes Word, Excel, PowerPoint, Outlook, and others-has surged recently.

With all of this said, the latest consensus estimates are calling for Productivity & Business Processes revenues to gain about 20.4% to hit $8.02 billion. In the previous quarter, Microsoft topped our consensus estimates for this segment and recorded year-over-year growth of 21.2%.

Microsoft's Intelligent Cloud segment, which includes Azure, the company's cloud computing platform that builds, deploys, and manages applications and web services through the company's own network of data centers, is expected to be a key growth catalyst for the Intelligent Cloud division this quarter.

According to our latest consensus estimate, Intelligent Cloud's total revenues are projected to gain 5.9% to hit $6.76 billion. Last quarter, Intelligent Cloud outpaced our estimates and posted a year-over-year growth rate of 10.8%.

Analysts and Hedge Funds Opinions

Microsoft Corporation received an $88.00 price target from analysts at Goldman Sachs Group, Inc. (The) in a research note issued on Thursday. The brokerage currently has a “buy” rating on the software giant’s stock. Goldman Sachs Group, Inc. (The)’s price objective would indicate a potential upside of 13.39% from the company’s previous close.

Several other analysts have also recently commented on the company…..

  • Microsoft Corporation has been assigned a $85.00 price target by stock analysts at Royal Bank Of Canada in a research note issued to investors on Wednesday. The brokerage presently has a “buy” rating on the software giant’s stock. Royal Bank Of Canada’s target price would suggest a potential upside of 9.55% from the company’s current price.
  • Stifel Nicolaus reaffirmed a “buy” rating on shares of Microsoft Corporation in a report on Thursday, October 12th.
  • Finally, Canaccord Genuity raised Microsoft Corporation from a “hold” rating to a “buy” rating and upped their price target for the stock from $76.00 to $86.00 in a report on Thursday, October 5th.

Two analysts have rated the stock with a sell rating, eleven have issued a hold rating and twenty-eight have issued a buy rating to the stock. The company currently has an average rating of “Buy” and an average target price of $81.50.

Institutional investors that have recently made a change to their positions in the stock….

  • Ferguson Wellman Capital Management Inc. raised its position in Microsoft Corporation by 1.1% during the second quarter. The firm owned 1,513,876 shares of the software giant’s stock after purchasing an additional 16,011 shares during the period. Microsoft Corporation accounts for approximately 3.9% of Ferguson Wellman Capital Management Inc.’s portfolio, making the stock its largest position. Ferguson Wellman Capital Management Inc.’s holdings in Microsoft Corporation were worth $104,351,000 at the end of the most recent reporting period.
  • Appropriate Balance Financial Services Inc. lifted its position in shares of Microsoft Corporation by 4.7% during the 2nd quarter. Appropriate Balance Financial Services Inc. now owns 643 shares of the software giant’s stock valued at $9,331,000 after acquiring an additional 29 shares during the period.
  • Strs Ohio owns 6,985,326 shares of the software giant’s stock, making the stock its 2nd largest position. Strs Ohio owned about 0.20% of Microsoft Corporation worth $481,498,000 as of its most recent filing with the Securities & Exchange Commission.
  • State of Wisconsin Investment Board raised its holdings in Microsoft Corporation by 7.3% in the 1st quarter. State of Wisconsin Investment Board now owns 7,827,220 shares of the software giant’s stock worth $515,501,000 after purchasing an additional 530,893 shares during the period.

Summary

With revenue generation now evenly split between old growth and new growth markets and sales continuing to look favorable as Microsoft increases its reach in cloud-computing and artificial intelligence, shares look even more appealing. Lastly, factor in an equally trendy, but far from over-the-top Microsoft stock chart — and this options trade looks promising.

Microsoft Corporation has a 52 week low of $57.28 and a 52 week high of $79.34. The company has a 50-day moving average of $75.44 and a 200-day moving average of $71.68. The stock has a market capitalization of $607.17 billion, a P/E ratio of 29.09 and a beta of 1.01.


Option Trade - Stanley Black & Decker, Inc. (NYSE:SWK) Calls

Monday, October 23, 2017

** OPTION TRADE: Buy the SWK NOV 17 2017 165.000 CALL at approximately $1.60.

Sell price is left to your own judgment.

Tool maker Stanley Black & Decker, Inc. (NYSE:SWK) will reports third-quarter numbers on Tuesday, October 24, before the market opens. Consensus calls for earnings of $1.86 per share, up from $1.68 during the same period last year. The street has a whisper number of $1.89, which suggests a $0.03 beat, which would be enough to push shares higher.

Also, analysts are expecting SWK to post revenues of $3.2 billion in 3Q17, a rise of 9.4% on a YoY (year-over-year) basis. In 3Q16, it reported revenues of $2.9 billion. If SWK meets analysts’ revenue expectations, it would be its third consecutive quarter of record revenues. Since 2012, its revenues have remained flat at $2.8 billion–$2.9 billion.

The housing sector remains strong, helping drive Stanley Black & Deck higher. Analysts forecast earnings growth of 12.3% during the current year, and 12.0% next year. The stock has a P/E of 20.4, which is reasonable considering the growth estimates.

Stanley Black & Decker has risen 37.1% on the year, and the stock will look to build on those gains.

Influencing Factors

Growth prospects seem impressive for Stanley Black & Decker's Tools & Storage segment, as evident from mid-single digit organic revenue growth expected in the year. The segmental results will get a boost from wide acceptance of DeWalt FlexVolt product and synergistic benefits from Newell Tools and Craftsman buyouts.

The expected increase in SWK’s revenue is primarily due to the acquisition of the Newell Brands tool business. SWK entered into an acquisition agreement in October 2016 to buy the company for ~$2.0 billion in cash. The deal, which was completed on March 10, 2017, included the Irwin and Lenox brands. In another deal, SWK acquired the Craftsman brand from Sears Holdings (SHLD). The brand had reported annual sales of $200.0 million. These two acquisitions along with strong organic growth could provide a favorable 3Q17.

SWK has also completed the sale of a majority of its Mechanical Security business to Dormakaba. The sale included the commercial hardware brands BEST Access, phi Precision, and GMT with annual revenue of approximately $270.0 million.

In the first two quarters of 2017, the surprise history of Tools & Storage segment has been impressive, with an average positive sales surprise of 1.64%. Third-quarter sales estimates are $2,228 million, an improvement over average sales of $2,057.5 million generated in the first half of the year.

SWK’s expected increase in adjusted EPS could be driven by higher organic and acquisition revenues and better operational expenses. Analysts are expecting SWK’s 3Q17 COGS (cost of goods sold) to be ~$2.0 billion, representing 62.3% of expected sales. In 3Q16, it reported COGS of $1.8 billion, representing 62.5% of sales. That’s a fall of 20 basis points on a YoY basis.

Analysts also expect better SG&A (selling, general, and administrative) expenses. They’re projecting them to be $638.4 million, representing 20.3% of expected sales. SWK’s 3Q16 SG&A expenses were $645.4 million, representing 22.4% of sales, a fall of 210 basis points YoY.

Stanley Black & Decker anticipates earnings in the third quarter to be roughly 25% to 26% (average is 25.5%) of 2017 earnings expected range. Considering the projected adjusted earnings per share range of $7.18-$7.38, it is believed that earnings in the third quarter will likely be within $1.80-$1.92 per share (mid-point is $1.86), way above $1.68 recorded in the year-ago quarter. As well, the company's shareholder-friendly policies will work in its favor in the quarters ahead.

Also, the industrial machinery is among the many industries that have rallied on the back of the Trump government's proposed infrastructure investment of $1 trillion. If implemented, the promised plan will boost the need for industrial products and hence benefit companies like Stanley Black & Decker.

Other tailwinds are the strengthening housing and commercial construction markets. Also, rise of 2 percentage points in Purchasing Managers' Index or manufacturing index in September is a positive indicator for the industry.

Analysts and Hedge Funds Opinions

Equities researchers at Seaport Global Securities upped their Q3 2017 earnings per share estimates for shares of Stanley Black & Decker in a research note issued last Wednesday. Seaport Global Securities analyst M. Shlisky now expects that the industrial products company will earn $1.88 per share for the quarter, up from their prior forecast of $1.85. Seaport Global Securities also issued estimates for Stanley Black & Decker’s FY2017 earnings at $7.31 EPS, Q1 2018 earnings at $1.65 EPS, FY2018 earnings at $8.23 EPS and FY2019 earnings at $9.21 EPS.

Stanley Black & Decker, Inc. had its target price lifted by KeyCorp from $160.00 to $185.00 in a research report published on Friday morning. The brokerage currently has a hold rating on the industrial products company’s stock.

Several other analysts have also recently commented on the company…..

  • Morgan Stanley is rating SWK “overweight” and recommending a target price of $169, which implies a return potential of ~7.8% from its closing price of $156.85 on October 18, 2017.
  • KeyBanc has recommended a target price of $185 for SWK, implying a return potential of 17.9% from its closing price of $156.85 on October 18, 2017.
  • Seaport Global Securities has rated SWK a “buy” with a target price of $160.
  • Stanley Black & Decker, Inc. was upgraded by investment analysts at Zelman & Associates from a “hold” rating to a “buy” rating in a report issued last Wednesday.

Analysts’ consensus indicates SWK’s 12-month target price of $165.81, which implies a return potential of 5.7% from the closing price of $156.85 on October 18, 2017. Analysts’ consensus target price has been on an upward trend since July, from $155.30 to its current target price.

Institutional investors that have recently made a change to their positions in the stock….

  • Vanguard Group Inc. grew its position in shares of Stanley Black & Decker by 2.6% in the 2nd quarter. Vanguard Group Inc. now owns 11,396,761 shares of the industrial products company’s stock valued at $1,603,865,000 after buying an additional 287,124 shares during the last quarter.
  • BlackRock Inc. grew its position in shares of Stanley Black & Decker by 1,670.7% in the 1st quarter. BlackRock Inc. now owns 10,447,937 shares of the industrial products company’s stock valued at $1,388,216,000 after buying an additional 9,857,885 shares during the last quarter.
  • State Street Corp grew its position in shares of Stanley Black & Decker by 3.2% in the 1st quarter. State Street Corp now owns 7,828,768 shares of the industrial products company’s stock valued at $1,040,211,000 after buying an additional 244,854 shares during the last quarter.

Summary

Stanley Black & Decker has a 52-week low of $111.89 and a 52-week high of $159.79. The company has a 50-day moving average price of $151.40 and a 200 day moving average price of $142.09. The stock has a market cap of $24.07 billion, a price-to-earnings ratio of 20.13 and a beta of 1.06.





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Whether you prefer to take a laid-back approach to your trading,

or to charge ahead in your options trading,

 Stock Options Made Easy Armchair Trader and Cut-to-the-Chase Trader Memberships put everything you need to succeed at your fingertips for just  $39 or $79 per month.







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