Earnings Predictions 
for the
Week Beginning April 20, 2020

Profiting From Trading Options!

Compare Exiting Before and After Earnings!

by Ian Harvey

April 19, 2020

ANOTHER EXTRA EARNINGS PREDICTIONS TRADE

San Jose, CA-based company Xilinx, Inc. (NASDAQ: XLNX), a leading provider of All Programmable FPGAs, SoCs, MPSoCs and 3D ICs will report after the market closes.

This computer chipmaker is expected to post quarterly earnings of $0.77 per share in its upcoming report, which represents a year-over-year change of -18.1%.

Revenues are expected to be $753.96 million, down 9% from the year-ago quarter.

The chipmaker saw a double-digit drop in its top line in the last reported quarter, while its net income was down by nearly a third over the prior-year period. Xilinx also pointed out on the last earnings conference call that its wired and wireless business will decline for the full year.

The consensus EPS estimate for the quarter has been revised 7.29% lower over the last 30 days to the current level.

XLNX released a very dour earnings report a little more than two weeks ago. The company announced that due to the slower-than-expected 5G rollout, the company was cutting 7% of its workforce and reevaluating earnings going forward. Xilinx itself had admitted in January that it is witnessing a slowdown in the roll-out of 5G networks "across multiple regions as many operators take a pause before the next wave of infrastructure deployment."

The loss of 5G momentum led to an 18% annual decline in Xilinx's wired and wireless business revenue in the fiscal third quarter. Xilinx gets 31% of its total revenue from this segment.

Xilinx, even taking advantage of the roll-out thanks to its relationship with Huawei, which recently won 57% of China Mobile's latest 5G tender, Xilinx 5G deployments in other areas such as Europe will be delayed on account of the COVID-19 pandemic.

It's been a long road downhill for Xilinx. The pioneer of field-programmable gate arrays (FPGAs) -- a widely used circuit that can be reprogrammed post-manufacture -- got hit in 2019 as the trade war between the U.S. and China heated up.

With the coming economic fallout from the coronavirus lockdown, the company's growth prospects for the immediate future look grim. Share value has been nearly cut in half from all-time highs reached early last year. 

Also, the broader slowdown in the semiconductor industry may negatively affect the chipmaker's prospects and weigh on a potential turnaround.

Therefore.....

The economic fallout of the novel coronavirus outbreak could weigh heavily on nearly 60% of Xilinx's business. The company gets 40% of its revenue from the industrial and aerospace and defense business, while another 19% comes from the automotive and consumer businesses.

It is estimated that there is an 80% chance of substantial contraction in global semiconductor sales this year on account of the pandemic. The firm forecasts that 2020 semiconductor revenue could fall 6% in its most likely scenario, as compared to an earlier expectation of 2% growth.

Xilinx is likely to feel the heat of this contraction. For instance, demand for the company's automotive chips could take a hit, as IHS Markit predicts a 23% decline in global auto sales as compared to last year. Meanwhile, the aviation industry is under great stress because of the COVID-19 outbreak, so the demand for new chips could dry up as airlines scramble to reduce costs.

Not surprisingly, analyst point toward further weakness in the company's top line in fiscal 2021.

Option trade to consider: Buy the XLNX MAY 15 2020 85.000 PUT at approximately $3.00.

(for those members requiring further guidance.....

STOP-LOSS – $1.20

SELL – $6.00)




AN EXTRA EARNINGS PREDICTION TRADE

Lockheed Martin Corporation (NYSE: LMT), an American global aerospace, defense, security, and advanced technologies company with worldwide interests, will report earnings before the market opens on Tuesday, April 21, 2020. The consensus earnings estimate is $5.75 per share on revenue of $15.23 billion; but the Whisper number is slightly higher at $5.81 per share.

Consensus estimates are for earnings to decline year-over-year by 4.01% with revenue increasing by 6.24%.

For the last reported quarter, it was expected that Lockheed would post earnings of $4.99 per share when it actually produced earnings of $5.29, delivering a surprise of +6.01%.

Over the last four quarters, the company has beaten consensus EPS estimates four times.

Short interest has decreased by 30.8% and overall earnings estimates have been revised higher since the company's last earnings release.

Lockheed Martin is the largest defense contractor in the world. Net sales for the company in 2019 were nearly $60 billion.

When there is instability in the world – whether that comes as a virus or a repressive regime – or significant geopolitical change brought on by rogue actors or power shifts among superpowers - defense companies stay busy.

Also, because these companies are so big – they have divisions all over the US – boosting defense spending is a win-win for politicians. It shows they’re tough and it also boosts the economy. In an election year, both are very important.

Consistent revenue growth across its major segments is expected to get reflected in the company’s upcoming results.

Solid revenue growth in each of the company’s business segments is likely to have boosted Lockheed Martin’s overall top line in the to-be-reported quarter.

Lockheed Martin’s Aeronautics segment has been a major growth catalyst for this defense contractor for decades. It primarily manufactures advanced, combat-proven jets and comprises almost 40% of the company’s top line. 

During the quarter, the company delivered its first block 8.1 upgrade HC-130J to the U.S. Coast Guard.

Also, its Aerospace unit delivered the second of the two KC-130J Super Hercules aerial refuelers to France.

It has also delivered its 500th F-35 aircraft to the U.S. Air Force, a program that has been the primary contributor to the segment’s top line.

Expect strong operational performance from Lockheed Martin’s Missiles and Fire Control (MFC) segment, which provides critical missile defense support to the United States and its foreign allies. Factors like consistent deliveries of critical and tactical strike weapons, developments in new hypersonic and classified programs and production of PAC-3 missiles are expected to have contributed to this unit’s growth in the first quarter of 2020.

The stock is still reasonably valued given its potential and it continues to perform. It’s up 19% in the past 12 months, and off a mere 4% year to date.

 Option trade to consider: Buy the LMT MAY 15 2020 420.000 CALL at approximately $7.00.

(for those members requiring further guidance.....

STOP-LOSS - $2.80

SELL – $14.00)




Options Trades to Consider Based on Expected Earnings Reports:

Monday, April 20, 2020


Info tech giant International Business Machines Corp. (NYSE:IBM) will report earnings after the market closes. The consensus earnings estimate is $1.70 per share (indicating a decline of 24.4% from the prior-year quarter) on revenue of $18.25 billion, (up 0.35% from the prior-year quarter).

Last quarter, IBM surprised Wall Street with Q4 revenue growth, after five straight periods of declining sales. More specifically, Red Hat revenue jumped 24%, with total cloud revenue up 21%.

IBM announced in January that Ginni Rometty would step down as CEO. New chief executive Arvind Krishna had already played a large role in shifting IBM’s focus to cloud, AI, and quantum computing.

Now the company hopes to expand its reach in the next-generation of technologies. This includes its $34 billion purchase of open-source software firm Red Hat, which officially closed in July 2019.

Influencing factors…..

IBM should have benefited from adoption of its cloud computing, mobile, security, analytics, cognitive technologies and AI related solutions.

IBM Services were selected by Spain-based private banking group, Banco Sabadell, in a ten-year services agreement.

IBM has been enhancing its efficiency of its blockchain solutions, and quantum computing systems and services, with growing clientele of IBM Q Network.

The incremental adoption of IBM Blockchain-powered Farmer Connect and Food Trust platforms will help.

IBM’s has seen growth in industry verticals like health, key areas of analytics and security.

During the first quarter, IBM rolled out Advertising Accelerator with Watson, with predictive analytics capabilities to boost audience engagement.

The company also improved IBM Watson with new Natural Language Processing (NLP) capabilities and enhanced business value of data.

IBM has added AI capabilities to its TRIRIGA solution to help real estate and facility management professionals better utilize office space and deliver a more engaging workplace experience.

IBM announced collaboration with Infosys INFY to aid enterprises accelerate digital overhaul of business processes by utilizing IBM public cloud.

COVID-19…..

IBM said it was making cloud and AI resources available to researchers and doctors to help with finding a treatment for COVID-19.

In a Securities and Exchange Commission filing, IBM said it was lending computing power to the White House Office of Science & Technology and the Department of Energy to help researchers under the COVID-19 High Performance Computing Consortium.

IBM said it was offering tools through The Weather Channel and associated apps to track cases of the virus around users.

Red Hat…..

Red Hat acquisition is a game-changer and should have aided revenues in the cloud segment. In the fourth-quarter 2019, Red Hat raked in some large wins, with 21 customers signing deals worth more than $10 million.

The combination of IBM’s cloud expertise and Red Hat’s software should make the company a leader in so-called “hybrid cloud” applications.

So…..

IBM has a “solid track record as a defensive holding during prior recessions given business critical nature of products/solutions,” Evercore ISI analyst Amit Daryanani said in a March note.

IBM stock is up over 22% since March 23 and its dividend yield rests at a strong 5.46%. However, investors can see that shares of IBM have fallen nearly 30% in the past five years. And despite IBM’s recent climb, its stock price has slipped 16% in the last 12 months.

There will be a short-term hit from the current crisis. But the vast increase in employees working from home will stress corporate information technology infrastructure — and could boost IBM revenue in some areas.

Option trade to consider: Buy the IBM MAY 15 2020 125.000 CALL at approximately $3.50.

(for those members requiring further guidance.....

STOP-LOSS - $1.40

SELL – $7.00)


Tuesday, April 21, 2020


Coca-Cola Co (NYSE: KO), an American multinational corporation, and manufacturer, retailer, and marketer of non-alcoholic beverage concentrates and syrups, will report earnings before the market opens. The consensus earnings estimate is for $0.44 per share on revenue of $8.49 billion; and the Whisper number is the same at $0.44 per share.

Consensus estimates are for earnings to decline year-over-year by 8.33% with revenue increasing by 5.86%.

For the last reported quarter, it was expected that Coke would post earnings of $0.43 per share when it actually produced earnings of $0.44, delivering a surprise of +2.33%.

Over the last four quarters, the company has beaten consensus EPS estimates three times.

Overall earnings estimates have been revised lower since the company's last earnings release.

Influencing factors.....

Coca-Cola is not immune to the effects of the ongoing coronavirus pandemic, which initially emerged in China. In February, it announced that the coronavirus outbreak in China, which is its third-largest market in the world, based on unit case volume, is likely to hurt its first-quarter 2020 performance.

Also, China contributes nearly 10% to the company’s global volume. China is Coca-Cola’s third-largest market in the world based on the unit case volume. This led to huge supply-chain disruptions in China due to travel restrictions as well as the closure of stores, movie halls and restaurants, cancellation of major sporting events, and promotion of social distancing to reduce the transmission of the virus. The containment efforts are likely to have marred the company’s revenues.

KO predicted that the COVID-19 outbreak in the country will hurt first-quarter 2020 organic revenues by 1-2 percentage points, unit case volume by 2-3 percentage points and earnings per share by 1-2 cents.

As well, it expects the persistence of the adverse currency rates to mar results in the first quarter of 2020. On the last earnings call, it predicted that unfavorable currency will affect first-quarter revenues by 2% and comparable operating income by 5%.

Option trade to consider: Buy the KO MAY 15 2020 47.500 PUT at approximately $1.80.

(for those members requiring further guidance.....

STOP-LOSS - $0.75

SELL – $3.60)


Snap Inc. (NYSE:SNAP), formerly Snapchat, Inc., operating the popular multimedia messaging app, will report earnings after the market closes. The consensus estimate is for a loss of $0.07 per share on revenue of $426.88 million (indicating a 33.2% surge from the year-ago quarter’s reported figure); but the Whisper number is a little worse at ($0.09) per share.

The company's guidance was for revenue of $450.00 million to $470.00 million. Consensus estimates are for year-over-year earnings growth of 50.00% with revenue increasing by 33.22%.

In the last reported quarter, Snap’s subscriber growth reflected by Daily Active Users (DAUs) increased 31 million on a year-over-year basis and 8 million sequentially. DAUs are expected between 224 million and 225 million, up 18% year over year for the first quarter.

The Consensus Estimate for DAUs is currently pegged at 223 million, suggesting 17.4% growth from the figure reported in the year-ago quarter.

Snap’s earnings beat the Consensus Estimate in all the trailing four quarters, the average being 25.6%.

Short interest has decreased by 14.5% since the company's last earnings release.

Social media stocks like SNAP have two competing narratives at play. On one hand, engagement should be rising at the moment. On the other, advertising revenues will face significant pressure as businesses slash spending.

Influencing factors.....

Snap’s focus on continuously adding a set of innovative features like Lens Studio 2.0, is making the Snapchat platform more attractive for users and advertisers. The growing adoption of the platform among the Gen Z (13-24 years) is expected to have driven DAUs.

ARPU improved 23.4% year over year in fourth-quarter 2019, a trend that most likely continued in first-quarter 2020 as well.

As well, increased usage of the Snapchat platform amid the coronavirus-led global lockdowns is expected to have benefited Snap. The company witnessed more than 50% jump in the usage of Snapchat’s voice and video calling features in late March than late February, which were often used with AR lenses.

Time spent playing with lenses increased by more than 25% over the same time frame.

Also, Snaps sent between friends and Group Chat engagement as well as Snaps sent to Group Chats reached an all-time high. Snap Games also witnessed all-time high engagement levels.

The rising uptake of Snapchat shows, driven by content related to news, health & wellness and gaming is expected to have aided user engagement.

Option trade to consider: Buy the SNAP MAY 15 2020 13.000 CALL at approximately $1.00.

(for those members requiring further guidance.....

STOP-LOSS - $0.40

SELL – $2.00)


Wednesday, April 22, 2020

Delta Air Lines, Inc. (NYSE:DAL) will report earnings before the market opens. The consensus estimate is for a loss of $0.70 per share on revenue of $9.64 billion; but the Whisper number is much worse at ($1.41) per share.

Consensus estimates are for earnings to decline year-over-year by 172.92% with revenue decreasing by 7.94%.

Short interest has increased by 38.3% and overall earnings estimates have been revised lower since the company's last earnings release.

Dire Warning.....

Airline stocks were trading down sharply on Thursday as industry executives warned of more cuts to schedules and cost-cutting measures—a sign that the government’s rescue package, negotiated this week, may go only so far.

The Treasury Department struck deals this week with at least 10 airlines on payroll grants worth around $25 billion. Airlines can also tap into another $25 billion in government-backed loans through a separate program, if they can’t line up financing in capital markets.

But the grants don’t address the underlying problem: People simply aren’t getting on planes. Industry groups estimate that global air traffic will now fall more than 40% this year compared with 2019. Domestic air traffic is down more than 90%. Airlines can’t cope for long with a collapse in air traffic that wipes out the vast majority of their revenue.

The grants negotiated by airlines and the Treasury won’t dilute equity very much and they provide the industry with cash and liquidity to avoid filing for bankruptcy protection.

But J.P. Morgan analyst Jamie Baker notes that the Treasury actually took a hard-line stance. The grants aren’t free, as initially expected. Instead, 30% of the grants must be repaid over 10 years. That is “a significant negative development for the sector,” Baker wrote in a note this week. It reduces the industry’s borrowing capacity and implies that Washington won’t provide more assistance if traffic doesn’t rebound sharply.

"Unfortunately, we simply don't see any way for most US airlines to avoid massive layoffs unless the industry-specific payroll protection grants/loans are extended," Baker said in a research note on Monday.

The hope is that traffic picks up over the summer, but the recovery is likely to be gradual.

The deals come after the coronavirus pandemic has gutted the airline industry and airline stocks. The crisis has forced governments to restrict travel and kept passengers off flights. Jet cabins remain nearly empty, airport passenger screenings have plummeted, and some analysts say it could take years for the industry to recover. Airlines have been chewing through cash as demand dries up.

Cowen analyst Helane Becker on Tuesday said the aid would likely get airlines through the next three to six months. But she said she doesn't think air-travel demand will rebound to 2019 levels for four to five years. And she said that she believes the airline industry would be at least 30% smaller at the end of the year.

Delta’s Deal.....

Delta, in a memo late Tuesday, also said that the government would be able to acquire 1% of the carrier's stock. That stake would come via warrants that Delta will provide the government to acquire Delta stock at 24.39 per share over five years.

Delta said that under its aid agreement with the government, it would get $5.4 billion in aid total. That amount includes a 10-year, low-interest loan of $1.6 billion. In a research note on Monday, Stifel analyst Joseph DeNardi estimated that Delta was eligible for up to $5.6 billion total via $3.9 billion in payroll grants and $1.7 billion in loans.

Influencing factors.....

With large-scale capacity cuts (mainly in February and March) amid plummeting air-travel demand and government travel restrictions, the carrier’s passengers revenues (accounting for approximately 90% of the top line) are expected to have declined considerably. The Consensus Estimate for first-quarter passenger revenues indicates a 6.3% fall from the figure reported in fourth-quarter 2019. Additionally, the consensus mark implies a 2.9% dip in total revenues for the soon-to-be-reported quarter.

Also, weak cargo demand due to global supply-chain disruptions as a result of the coronavirus pandemic is expected to reflect on cargo revenues. Apart from soft demand, massive flight cuts might have weighed on Delta’s cargo revenues by reducing cargo carrying capacity as the airline transports freight in the bellies of passenger aircraft. Therefore, the Consensus Estimate for cargo revenues suggests a 6.4% decrease from the number reported in fourth-quarter 2019.

Option trade to consider: Buy the DAL MAY 15 2020 20.000 PUT at approximately $1.00.

(for those members requiring further guidance.....

STOP-LOSS - $0.40

SELL – $2.00)

 

Thursday, April 23, 2020


Santa Clara, California based 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, will report earnings after the market closes.

The consensus estimate is for a gain of $1.28 per share (up 44%) on revenue of $18.75 billion (up 16% annually).

For the last reported quarter, it was expected that Intel would post earnings of $1.24 per share when it actually produced earnings of $1.52, delivering a surprise of +22.58%.

Over the last four quarters, the company has beaten consensus EPS estimates four times.

The consensus EPS estimate for the quarter has been revised 0.07% higher over the last 30 days to the current level. This is essentially a reflection of how the covering analysts have collectively reassessed their initial estimates over this period.

Intel is the largest semiconductor company in the U.S. by revenue and it’s coming off a strong fourth quarter that was driven by data-center and PC demand. The historic chip powerhouse also upped its guidance and noted that it is set to benefit from the on-going expansion of cloud computing, big data, and more.

INTC, like the broader chip space, is poised to expand as part of the broader tech revolution that semiconductors support. “In 2019, we gained share in an expanded addressable market that demands more performance to process, move and store data,” CEO Bob Swan said in prepared Q4 remarks. “One year into our long-term financial plan, we have outperformed our revenue and EPS expectations.”

Intel could possibly see a boost in Q1 and Q2 as companies, schools, governments and more, quickly try to outfit their employees with laptops and beef up their cloud computing efforts as millions of people work remotely.

Influencing factors…..

Intel stock has slightly outpaced the broader chip space over the last three years, up 68% vs. 61%. INTC shares are up around 3% in the last 12 months and are now just barely in the green for 2020, after they surged recently as part of the broader market comeback.

The company’s stable payout ratio is important and reassuring since Intel announced last month that it will suspend stock buybacks, joining AT&T T and others. Intel wrote that the suspension of its buyback plan “is prudent given uncertainty regarding the length and severity of the pandemic” and noted that its balance sheet remained strong.

While Q1 PC shipments were hurt by the COVID-19 pandemic’s impact on Chinese PC production and demand, they benefited late in the quarter from notebook purchases made to support remote work and learning activities. Earlier this month, Intel CEO Bob Swan confirmed that his firm’s PC CPU sales (much like the PC-related chip sales of some other firms) have gotten a lift from this trend.

Intel forecast in January that its Data Center Group (DCG), which handles sales of server CPUs and certain other data center products, would have a big Q1 thanks to strong orders from cloud giants (the proverbial hyperscalers), before seeing hyperscaler demand cool in subsequent quarters. And in recent weeks, cloud capital spending has gotten a boost from capacity upgrades made to support usage spikes for various remote work and digital media apps/services.

In January, Intel set a 2020 capex budget of $17 billion, above reported 2019 capex of $16.2 billion and 2018 capex of $15.2 billion. With TSMC having just reiterated its 2020 capex budget and chip equipment makers reporting that they continue seeing strong orders for the time being, it wouldn’t be surprising to see Intel keep its capex budget at or near $17 billion.

Tiger Lake, the second Intel notebook processor platform to rely on its advanced 10-nanometer (10nm) manufacturing process node, has been scheduled to see a broad rollout during the second half of 2020. And though there has been limited clarity about 2020 volumes, Intel has also promised to ship its first 10nm server CPUs (based on a platform known as Ice Lake) before year’s end.

Option trade to consider: Buy the INTC MAY 15 2020 62.500 CALL at approximately $2.20.

(for those members requiring further guidance.....

STOP-LOSS – $0.90

SELL – $4.40)


An Important Note: That these suggestions for options trade considerations require investors/traders to use their own discretion as to when to enter or exit! As well, it is advisable to do further research and due diligence before executing your trade.

It is sometimes best to exit a trade, if there is already sufficient profit accrued, before an earnings report is presented.

If you wish to receive more options trading recommendations similar to this, which will help boost your portfolio strategy, check out the other  memberships available at Stock Options Made Easy.

When To Exit A Trade Based On Earnings?.....

It is also worth considering, when options trading earnings reports – “Do we exit on already existing profits or leave the companies to report their earnings and hope for bigger profit?” 

As most traders realize, there is a 50/50 chance that the company stock price could go either way after reporting earnings – even if the report is good, the stock price could reverse – and if you hold a call option, means depletion of an already good profit if it exists. A similar situation can be found if you hold a put option, and a report is not that sound (and you expect a profit from this) but the stock price can, at times move upwards due to traders bias or other external conditions......READ MORE.....

The Decision Is Yours!

Before You Trade Consider This Strategy……

"Trading Capital Management" is a key component of your trading strategy. The strategy, on which we base our trades to achieve maximum profit, and to minimize loss, is contingent on using an equal amount of money for each trade.

……continue reading this article……


”Success is simple. Do what's right, the right way, at the right time.”

Option Tip for your Success!

Options traders are not successful because they win.

Options traders win because they are successful.


Best of Trading,
Ian Harvey
Director of Stock Options Made Easy

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