by Ian Harvey
January 21, 2019
A Quick Review of Last Week’s Market…..
The Dow and S&P 500 posted their fourth straight week of gains, their longest since August. They both gained more than 2 percent. Stocks are also up sharply to start the year. In fact, 13 trading days in, it's the best start to a year for the S&P 500 since 1987.
Boosting the stocks for the week came from several factors offsetting a negative earnings reaction for Netflix …..
For the week, the Dow Jones Industrial Average (DJI) finished up 3.0% at 24,706.35 closing out of correction territory, as the materials and industrials sectors outperformed.
The S&P 500 Index (SPX) was up 2.7% at 2,670.71 for the week.
And the Nasdaq Composite (IXIC) also up 2.6% for the week at 7,157.23.
If the trade deal issue is resolved to satisfaction it would aim to reduce the annual U.S. deficit to zero by 2024.
If this occurs it will boost business and consumer confidence, and there is still plenty of room for the market to do really well.
As for the upcoming week, markets will be closed on Monday for Martin Luther King Jr. Day, but the shortened week will still have plenty of corporate earnings reports that could move stocks.
Merck & Co Inc
(NYSE:MRK) could be one to watch for bulls, but Starbucks could be
problematic, while bears should consider these two retailers, American Eagle Outfitters (NYSE:AEO) and Abercrombie & Fitch Co
Earnings to Watch…..
Markets closed for Martin Luther King Jr. Day
Johnson and Johnson, Travelers, IBM, Capital One, Stanley Black and Decker, UBS, Fifth Third, Halliburton, TD Ameritrade, Steel Dynamics
Abbott Labs, Comcast, Procter and Gamble, United Technologies, Northern Trust, Kimberly-Clark, Ford, Las Vegas Sands, F5 Networks, Raymond James, Texas Instruments, Varian Medical, Citrix, BancorpSouth
Intel, Starbucks, Bristol-Myers Squibb, Union Pacific, Freeport-McMoRan, Intuitive Surgical, JetBlue, Southwest Air, Textron, ETrade, Discover Financial, Alaska Air, Western Digital, Norfolk Southern
Colgate-Palmolive, Synchrony Financial, NextEra Energy, Air Products, Vodafone, DR Horton, Lear, LM Ericsson, Iberiabank
Economic Data to Watch…..
Markets closed for Martin Luther King Jr. Day
OUT WHILST THE GOING IS GOOD!
GREED CAN BE THE UNDOING OF A GOOD PROFIT!
YOU NEED TO BE IN IT TO PROFIT!
Options Trades to Consider Based on Expected Earnings Reports:
Tuesday, January 22, 2019
The struggling info tech giant International Business Machines Corp. (NYSE:IBM) will report
earnings after the market closes. The consensus earnings estimate is $4.81 per
share on revenue of $21.75 billion; but the Whisper number is for $4.88 per
share. Consensus estimates are for earnings to decline year-over-year by 7.14%
with revenue decreasing by 3.52%.
International Business Machines Corp. is looking at a second straight quarter of revenue declines. And Wall Street remains skeptical of IBM’s turnaround program. The company failed to make the gains in cloud computing and artificial intelligence that it has been working to for years, which led to the massive $34 billion acquisition of RedHat announced last year. A lot of analysts believe IBM overpaid for RedHat and it will take many years to recoup the cost.
The stock was already showing weakness before the announcement and fell sharply on the news. The stock drop was compounded by a correction in the overall market. There is a lot of negativity priced into the stock at this time. IBM shares have fallen nearly 16% since the company’s previous earnings report, in which revenue fell short of Wall Street estimates.
Instinet analyst Jeffrey Kvaal, who has a buy rating on IBM and reduced his price target to $160, said a strong dollar still presents a headwind for IBM and will likely continue into 2019. Even as revenues slip, IBM’s focus is shifting revenue into that “strategic imperatives” column. Kvaal expects that balance to be even for the year.
Stifel analyst David Grossman, who has a buy rating and a $178 price target on IBM, said he expects earnings per share and free cash flow at the company to remain relatively flat in 2019 and 2020, with growth resuming in 2021.
“This analysis assumes no revenue or cost synergies from the RHT acquisition and modest headwinds from IBM’s residual core,” Grossman said.
Overall earnings estimates have been revised lower since the
company's last earnings release.
Option trade to consider: Buy the IBM FEB 15 2019 120.000 PUT at approximately $2.80.
Wednesday, January 23, 2019
Consumer products giant Procter
& Gamble Co (NYSE: PG) will report earnings before the market opens. The consensus
earnings estimate is $1.21 per share on revenue of $17.20 billion; but the
Whisper number is a little higher at $1.23 per share. Consensus estimates are
for year-over-year earnings growth of 1.68% with revenue decreasing by 1.12%.
Procter & Gamble has been one of the stronger stocks over the last year, and the stock was able to avoid much of the December sell off that shook the markets. Now, Wall Street is expecting to hear mostly good news when the company announces fiscal second-quarter results.
The company has struggled to grow earnings in recent years, but analysts see a better future with forecast average annual earnings growth of 6.7% over the next five years.
The company has done a good job narrowing its product line, focusing on its most
brandable products, and reducing costs to drive top-line growth which should
lead to another solid quarterly report and allow the stock to get back to its
P&G's last announcement was headlined by some of the
best growth that the consumer giant has posted in years. Organic sales expanded
by 4% on healthy volume to outpace rival Kimberly Clark by a wide margin.
Procter & Gamble's market share growth is one of the management
main targets with "organic sales
growth above market growth rates"; so that earnings can improve at a
mid- to high-single-digit pace. That top line success also supports P&G's
third core objective of converting at least 90% of annual earnings into free
The company announced plans to boost prices by 4% in its
Pampers franchise and by 5% or more across its Bounty, Charmin, and Puff
CEO David Taylor and his team currently calls for sales
growth to accelerate between 2% and 3%, up from 1% last year.
Also, overall earnings estimates have been revised higher since the company's last earnings release.
Option trade to consider: Buy the PG FEB 15 2019 95.000 CALL at approximately $0.60.
Ford Motor Company (NYSE: F) will report earnings after the
market closes. The consensus earnings estimate is for $0.30 per share on
revenue of $36.96 billion. Consensus estimates are for earnings to decline
year-over-year by 23.08% with revenue decreasing by 10.51%.
Short interest has decreased by 18.6% since the company's
last earnings release.
In the last reported quarter, Ford’s earnings were in line
with estimates. Over the past four quarters, the automaker’s earnings have
surpassed estimates once, missed twice and have been in line once, the average
negative surprise being 3.8%.
Over the past three months, shares of Ford’s have lost 2.5% against the industry’s increase of 15.4%.
Ford is witnessing robust demand for its trucks and SUVs, owing to customers’ shifting focus toward spacious and comfortable vehicles. In fact, its F-Series, Ford Expedition and Lincoln Navigator are among the few winning models in its portfolio. In the United States, the company’s sales across truck and SUV segments created records in 2018.
A strong mix has helped expand the average transaction pricing for
Ford’s vehicles. On a year-over-year basis, the transaction price for the
company surged $1,600 in December 2018 compared with an increase of $470
recorded by the overall industry.
Amid its business restructuring plan, the company expects earnings and
revenues to improve in 2019.
Ford sees decent prospects with its set of new launches that are likely to generate increased operating earnings, revenues and adjusted operating cash flow in 2019. Between 2019 and 2023, the company set a target to invest 90% of funds for developing trucks and SUVs. Further, its restructuring plan, likely economic recovery in China and redesigning European operations are expected to contribute to Ford's earnings in 2019.
Option trade to consider: Buy the F MAR 15 2019 9.000 CALL at approximately $0.20.
Thursday, January 24, 2019
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 earnings estimate is for $1.22 per share on revenue of $19.01 billion; but the Whisper number is higher at $1.26 per share. The company's guidance was for earnings of approximately $1.22 per share. Consensus estimates are for year-over-year earnings growth of 12.96% with revenue increasing by 11.48%.
In the last reported quarter, Intel delivered non-GAAP earnings of $1.40 per share, which beat the Zacks Consensus Estimate by 25 cents. The figure surged 45.8% from the year-ago quarter and 33.3% sequentially.
Revenues totaled $19.163 billion, up 18.7% year over year and 13% quarter over quarter.
Overall earnings estimates have been revised higher since
the company's last earnings release.
Factors driving Intel…..
These initiatives are expected to aid the company bolster Internet of Things Group or IOTG revenues, in turn top-line growth. As well, strength in retail and video applications are anticipated to drive IOTG revenues.
The greater number of threads and cores in the recently
introduced Intel Core i9-9900K gaming processor is anticipated to aid the
semiconductor giant to improve its competitive position against peers like
Advanced Micro Devices.
Option trade to consider: Buy the INTC FEB 15 2019 50.000 CALL at approximately $1.30
American Airlines Group Inc (NASDAQ: AAL) will report earnings
before the market opens. The consensus earnings estimate is $1.03 per share on
revenue of $11.06 billion; but the Whisper number is higher at $1.09 per share.
Consensus estimates are for year-over-year earnings growth of 8.42% with
revenue increasing by 4.34%.
In the last reported quarter the company came up with a
positive earnings surprise of 0.9%. However, the bottom line decreased on a
year-over-year basis, mainly due to high fuel costs. Revenues also beat the
Consensus Estimate and improved on a year-over-year basis owing to strong
demand for air travel.
Short interest has decreased by 14.0% and overall earnings
estimates have been revised higher since the company's last earnings release.
American Airlines was facing an especially tough year-over-year RASM comparison last quarter. In the fourth quarter of 2017, unit revenue surged 5.6%. By contrast, American's RASM grew at less than half that rate in 2018. This suggests that even if underlying revenue trends stay constant, American Airlines' unit revenue performance should improve in 2019.
American Airlines is set to expand at Dallas-Fort Worth International Airport -- one of its most profitable hubs -- later this year. The carrier will gain access to 15 additional gates, allowing it to add up to 100 extra peak-day flights over the summer. This will enable it to serve more small cities, which tend to generate disproportionately high unit revenue. The first new routes will begin in March, with others phasing in between then and June.
American Airlines will get similar opportunities to add capacity in Charlotte, North Carolina, and Washington, D.C. in 2020 and 2021, respectively. As of mid-2018, those three hubs had average pre-tax margins 5.6 percentage points higher than American's system-wide average. Shifting capacity from less-lucrative hubs to Dallas-Fort Worth, Charlotte, and Washington, D.C. could thus have a meaningful positive impact on unit revenue and profitability.
Oil prices plunged in the last three months of 2018. Even
after a recent rebound in the oil market, the price of jet fuel is down by more
than $0.50 per gallon from its peak on Oct. 3. As a result, American Airlines
is currently on track to see a meaningful year-over-year decline in its fuel
costs this year, whereas just a few months ago, it seemed likely that fuel
costs would rise again in 2019.
Even though the company is burdened by about $25 billion of debt and capital lease liabilities, American's investments of the past few years should start to pay off in 2019. And with its capital expenditures set to moderate dramatically beginning in 2020, American Airlines will be able to start chipping away at its debt load, giving investors more comfort over its financial stability -- and potentially driving a rebound in its stock price.
Option trade to consider: Buy the AAL FEB 15 2019 3.000 CALL at approximately $1.10
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.
OUT WHILST THE GOING IS GOOD!
GREED CAN BE THE UNDOING OF A GOOD PROFIT!
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?”
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……