Earnings Predictions
for the
Week Beginning August 21, 2017

Profit From A Steady Stream Of Earnings In The Week Ahead!

by Ian Harvey

August 19, 2017

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Profit From A Steady Stream Of Earnings

In The Week Ahead!

Earnings predictions for the week beginning August 21, 2017 -- continue to profit from a steady stream of earnings!

All three indexes suffered another weekly loss, marking the Dow's worst two-week stretch since the Brexit drama of June 2016, and the Nasdaq's longest weekly losing streak since May 2016.

Looking at the overall results for the major indexes for the past week:

  • The Dow Jones Industrial Average (DJIA) was down 0.8%, to end then week at 21,674.51. The index has lost 418.3 points in two weeks -- the most in more than a year.
  • The S&P 500 Index (SPX) was down 0.7% for the week, at 2,425.55.
  • The Nasdaq(COMP) was lower for the week, down 0.6 percent at 6,216.53.
  • The VIX, CBOE's volatility index was also at a loss, dropping 8.1%, to settle at 14.26.

Earnings So-Far

The Q2 earnings season is drawing to a close, with results from 474 S&P 500 members or 94.8% of the index’s total membership already out. Total earnings for these companies are up +10.6% from the same period last year on +5.6% higher revenues, with 74.9% beating EPS estimates and 68.4% beating revenue estimates.

There have been plenty of positives so far from the early start of the earnings season, and members of Stock Options Made Easy have been benefiting from this situation; here are some of these positive aspects:-

  • The earnings and revenue growth pace is steadily going up relative to pre-season expectations.
  • An above-average proportion of companies are beating EPS and revenue estimates.
  • Q2 growth is broad-based and not dependent on one or two sectors.
  • Estimates for the September quarter have started coming down, but the pace and magnitude of negative revisions compares favorably to other comparable periods.

Moving Forward

The Q2 results are out at this stage from two-thirds of the Retail sector companies, but has not impressed greatly; with total earnings for the sector up only +0.1% on +6.4% higher revenues; but, results show 76.9% beating EPS estimates and a very strong 84.6% beating revenue estimates. This is a notably higher proportion of positive beats from the sector than has been the case historically.

There are still quite a few companies from the Retail Sector still to report Q2 results.

Also, several highly rated companies are reporting in the coming week, including Broadcom (AVGO), Salesforce (CRM), Momo (MOMO), Veeva Systems (VEEV) and Toll Bros. (TOL).

The economic policy symposium sponsored by the Federal Reserve Bank of Kansas City runs from Thursday to Saturday. This year's theme is “Fostering a Dynamic Global Economy." Fed Chairwoman Janet Yellen will speak Friday about financial stability, a week after minutes from the Fed's last meeting revealed policymakers were concerned about "elevated vulnerabilities" from high asset prices.

As for the Fed, market expectations for another Fed rate hike this year continued to fade this past week, and the Fed is expected to sound relatively dovish at Jackson Hole.

European Central Bank President Mario Draghi will attend for the first time in three years, and his appearance comes just a few weeks before ECB policymakers meet Sept. 7.

There is little data in the coming week, with just home sales data Wednesday and Thursday and durable goods Friday.

Keep-in-mind that stocks could be entering a longer period of volatility, with surprises that could continue to come from Washington. And remember, the months of August and September usually brings plenty of disturbance and market upsets.

There could be a few pull-backs in the weeks ahead; and if so, will likely be shallow and short-lived – short of a major catastrophe - which provides an opportunity to profit from lower entry costs.

A Look Back At Last Week’s Earnings Predictions

Earnings Results for the Week Beginning August 14, 2017

DATE TRADE GAIN
14 August 2017 SYY SEPT 15 2017 50.00 CALL P.P: 43%
15 August 2017 DKS SEPT 15 2017 35.000 PUT P.P: 462%
15 August 2017 A SEPT 15 2017 60.000 CALL P.P: 96%
16 August 2017 NTAP SEPT 15 2017 40.000 PUT P.P: 57.5%
17 August 2017 BABA SEPT 15 2017 155.000 CALL P.P: 176%
18 August 2017 DE SEPT 15 2017 125.000 PUT P.P: 264%
18 August 2017 EL SEPT 15 2017 100.000 Call P.P: 79.5%

 NOTE: P.P: – Potential Profit

Options Trades to Consider Based on Expected Earnings Reports:

Monday, August 21

BHP Billiton Limited (ADR)(NYSE:BHP) --Among 31 analysts covering BHP, 8 have Buy rating, 6 Sell and 17 Hold. Over the last 30 days, the Consensus Estimate for the stock moved south for fiscal 2018.

Headwinds such as stiff industry rivalry, sudden outbreak of any natural disaster or unfavorable government policies might hurt the BHP Billiton’s results in the quarters ahead.”

BHP already mines approximately 1/5th of the world’s iron ore and 8% of the world’s copper. It’s very difficult for the $132 billion company to become significantly larger.

It’s a cyclical commodity producer and is highly dependent on China -- it increasingly looks as though the primary driver of iron ore demand is unproductive infrastructure funded by increasingly wild levels of debt.

Option trade to consider: Buy the BHP SEPT 15 2017 41.000 PUT at approximately $2.00.

Tuesday, August 22

Intuit Inc. (NASDAQ:INTU) -- provides financial, accounting and tax preparation as well as software and related services for small businesses, consumers, and accounting professionals in the United States and internationally.

The company's growing SMB exposure and its strategic acquisitions will boost the segment. Increased adoption of its cloud-based services and products is another catalyst.

Intuit reported stellar third-quarter fiscal 2017 results.

The company has also restructured business to focus on the QuickBooks services.

Option trade to consider: Buy the INTU SEPT 15 2017 140.000 CALL at approximately $2.00.

Wednesday, August 23

HP Inc. (HPQ) - Last quarter, the company posted a positive earnings surprise of 2.6%. Several reasons to like HPQ:-

The split from Hewlett Packard Enterprise Company HPE in November 2015 enabled HP to make customized approach for its businesses which was not possible when it operated as a single entity.

  • Working on product innovation and differentiation, as well as enhancing the capabilities of the printing business to stabilize its top line.
  • Rolling out various models under its PC product lines of EliteBook, Spectre and Pavilion Wave.
  • Focusing on its pricing actions and marketing and sales activities which have helped in stimulating demand for the company's PC products in the market.
  • Has gained its top position once again by replacing Lenovo, per Gartner's recently released data on PC shipment for second-quarter 2017 .
  • Last-quarter growth in the company's PC shipments was its fifth quarter of consecutive year-over-year improvement, after several quarters of decline.

HP's efforts to turn around the business have been commendable and seem to be in the right direction as indicated by the results of the last few quarters.

Option trade to consider: Buy the HPQ Sept 15 2017 19.000 CALL at approximately $0.40.

Thursday, August 24

Abercrombie & Fitch Co. (NYSE:ANF) --  is expected to report before the market opens. Based on analysts' forecasts, the consensus EPS forecast for the quarter is $-0.34. The reported EPS for the same quarter last year was $-0.25.

Management expects second-quarter comps to remain challenging and gross margin to be pressurized. Moreover, currency headwinds are expected to hurt performance throughout fiscal 2017. While strength at the company’s Hollister brand and direct-to-consumer operations provide some respite, the aforementioned obstacles cannot be ignored.

Further, investors seem jittery about Abercrombie’s upcoming performance, as reflected by a nearly 7% drop in its shares over the last five trading sessions. In fact, the company has slumped 21.9% so far this year, while it fared better than the industry’s 28.2% decline.

Option trade to consider: Buy the ANF SEPT 15 2017 9.000 PUT at approximately $0.50.

Ulta Beauty Inc. (NASDAQ:ULTA), the nation's largest beauty retailer, will release its second-quarter earnings results after the closing bell on August 24. A long-time beacon of hope in the struggling retail industry, Ulta has slumped significantly since its last report. Still, the company has a strong earnings surprise track record and holds exciting growth prospects.

Analyst Daniel Hofkin of William Blair is predicting strong growth ahead. When weighing a number of metrics like prestige boutique rollouts, new TV advertising, and acceleration of loyalty member growth along with branding and marketing initiatives, the analyst believes that the largest beauty retailer in the U.S. is all set to hand in stellar sales outclassing expectation in the foreseeable future.

Ulta Beauty remains well positioned to deliver strong, better-than-expected sales and earnings growth in the coming years (with EPS growth averaging 20%-plus), helped by a unique one-stop assortment of brands/products and services, a low-pressure in-store shopping environment, a robust ulta.com business helped by an increasingly seamless experience with the stores, and a powerful ULTAmate Rewards loyalty program.

Option trade to consider: Buy the ULTA SEPT 15 2017 260.000 CALL at approximately $6.00.

In Conclusion

So, expect fairly low rates, low growth and low volatility which would be a good environment for growth and emerging markets; but be prepared for periods of higher volatility.

Also, an understanding that the market's going to continue to react in the short term to any further signs of escalation or de-escalation of the geopolitical risk which will help plan for a successful and profitable week ahead.

Therefore, with the market uptrend still under pressure, investors should exercise extra caution. But by learning to use call and put options, investors can significantly reduce risk and capitalize on basing stocks that are making breakaway gains caused by earnings reports.

You will notice that most options trades to consider have short-term expiry dates, as the expected movement of the option’s price should occur just prior to, or shortly after, report of earnings. It is entirely up to the individual trader as to whether they add a stop-loss or not.

Also Note: 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.

If you wish to receive more options trading recommendations similar to this, which will help boost your portfolio strategy, get on board with the members of Stock Options Made Easy.

Our proven track record says it all!!


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


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