Earnings Predictions 
for the
Week Beginning January 27, 2020

Profiting From Trading Options!

Compare Exiting Before and After Earnings!

by Ian Harvey

January 12, 2019

Options Trades to Consider Based on Expected Earnings Reports:

Tuesday, January 28, 2020

Defense contractor, United Technologies Corporation (NYSE:UTX), will report fourth-quarter and full-year results before the opening bell. The consensus earnings estimate is $1.84 per share, a year-over-year decline of 5.64%, on revenue of $19.4 billion, up 7.65% from the year-ago period.

The company delivered positive earnings surprise of 13.75%, on average, in the trailing four quarters, surpassing estimates all through. United Technologies’ earnings of $2.21 per share topped the Consensus Estimate of $2.03 by 8.87% in the third quarter.

The company plans to divide into three segments: one dedicated to aerospace and defense, another to air conditioning, and a third to making elevators. As well, the aerospace unit is merging with Raytheon (ticker: RTN) after the split is complete.

The stock is up about 36% over the past 12 months, better than the 27% gain of the S&P 500 over the same span.

In the past three months, the stock has gained 7.6% compared with the industry’s growth of 11.4%.

Influencing factors.....

The company is likely to have benefited from continued strength in commercial aftermarket and military businesses at both Pratt & Whitney and Collins Aerospace segments and solid commercial OEM (Original Equipment Manufacturer) sales at the Pratt & Whitney segment.

As well, the company’s commercial business is likely to have performed well in the quarter on account of favorable mix in Otis new equipment orders in China and strong service business.

In the third quarter, acquisitions had a positive impact of 14% on sales, a trend that most likely continued in the fourth quarter owing to strength in the acquired Rockwell Collins business (in November 2018). The buyout has not only strengthened the company's existing product portfolio but has also aided in launching innovative solutions for aerospace customers.

About 75% of analysts covering the company rate the shares at Buy, about 20 percentage points higher than the average Buy-rating ratio for stocks in the Dow Jones Industrial Average.

Option trade to consider: Buy the UTX FEB 21 2020 155.000 CALLS at approximately $2.50.

(Buy in at the lowest price that you can due to the market pull-back)

HCA Healthcare Inc (NYSE: HCA) will report earnings before the market opens. The consensus earnings estimate is $3.09 per share on revenue of $13.4 billion.

In the last reported quarter, the company reported adjusted earnings of $2.23 per share, surpassing the Consensus Estimate by 4.2%. Moreover, the bottom line inched up 3.2% year over year on the back of higher revenues.

This, Nashville, TN-based hospital operates a network of acute care hospitals, outpatient facilities, clinics and other patient care delivery settings.

Influencing factors…..

The industry is witnessing increased investment in technology. Players are making investments in health technologies and working toward harnessing the power of big data to efficiently test methodologies, discover trends and provide information to support their physicians and clinicians in their continuous struggle to improve the quality of care.

The industry has over the past few years started consolidating mainly due to the pressures of healthcare reform. Players are continuing to resort to mergers and acquisitions in order to create operational, strategic, and financial value for their operations.  

The number of Americans 65 and older is projected to grow by 34% between 2015 and 2030 — and by 2035, older adults will outnumber children for the first time in U.S. history, according to the U.S. Census Bureau. Also, due to the anticipated increase in life expectancy of Americans, the number of people aged 85 years and older may grow from 6 million in 2015 to 9 million by the year 2030. This anticipated increase in life expectancy will spur demand for healthcare services and, more importantly, demand for innovative, more-sophisticated means of delivering those services.

As to HCA.....

Earnings are likely to have been supported by a solid revenue stream on higher admissions and licensed beds. These factors have been driving its results over the last few quarters, a trend that most likely continued in the to-be-reported quarter.

Also, the top line is expected to have been boosted by growth in admissions in the fourth quarter. The Consensus Estimate for revenues stands at $13.3 billion, suggesting an 8.5% rise from the prior-year reported number.

The consensus mark for the total number of hospitals implies a 2.8% improvement from the year-earlier reported figure, attributable to strategic acquisitions made by HCA Healthcare.

The consensus estimate for fourth-quarter patient days indicates a 6.6% upside from the year-ago reported number.

The Consensus Estimate for the licensed number of beds is pegged at 48.6 million, implying a 3% improvement from the prior-year reported figure. This uptrend might have been boosted by the rising number of hospitals.

Share repurchases made by the company are likely to have aided its bottom line.

HCA Healthcare’s steady generation of cash flow is also likely to have helped.

Option trade to consider: Buy the HCA FEB 21 2020 145.000 CALLS at approximately $5.00.

(Buy in at the lowest price that you can due to the market pull-back)

The Santa Clara, Calif.-based company Advanced Micro Devices, Inc. (NASDAQ:AMD), a global semiconductor company, will report earnings after the market closes. The consensus earnings estimate is $0.31 per share on revenue of $2.10 billion; and the Whisper number is much the same at $0.32 per share.

Consensus estimates are for year-over-year earnings growth of 287.50% with revenue increasing by 47.99%.

Influencing factors.....

Hopes are high for a semiconductor demand boom, and analysts think AMD started benefiting in the fourth quarter.

AMD unveiled Athlon 3000 series mobile processors, bringing the capabilities of Zen architecture and Radeon Graphics to conventional notebooks. The processors are scheduled to be available across OEMs in early 2020 globally.

The company also announced availability of AMD Ryzen Threadripper 3990X desktop processor featuring 128 threads and 64 cores, from Feb 7, 2020.

The new Ryzen Threadripper processor, priced at $3,990, is developed on Zen core architecture utilizing 7nm process technology. Higher core count of Threadripper 3990WX is expected to provide AMD a competitive edge against Intel in the high-end desktop market (HEDT) considerably.

AMD is benefiting from robust adoption of the company’s EPYC server and embedded processors, and Ryzen desktop and mobile processors.

Also, Microsoft’s Surface Laptop 3 15” variant utilizes AMD’s Ryzen Surface Edition processor for advanced graphics performance.

Short interest has decreased by 34.0% and overall earnings estimates have been unchanged since the company's last earnings release.

The emergence of high-end cloud computing, thinner laptops, and demand for fast processing will bode well for the newly introduced CPUs.

Also, increasing adoption of AI techniques and ML tools and initiatives to boost workplace productivity are primarily responsible for driving high-end desktops and laptops processors.

Product innovation and roll out of processors utilizing 7nm technology will help AMD increase market share further against Intel, going forward.

The new processors are anticipated to help the company to capitalize on emerging BYOD market, enterprise productivity and ed-tech verticals, in the days ahead.

Option trade to consider: Buy the AMD FEB 21 2020 50.000 CALLS at approximately $4.00.

(Buy in at the lowest price that you can due to the market pull-back)

Wednesday, January 22, 2020

Services-provider company Microsoft Corporation (NASDAQ:MSFT), the tech titan, will report earnings after the market closes. The consensus earnings estimate is for $1.32 per share on revenue of $35.69 billion; but the Whisper number is higher at $1.38 per share.

Consensus estimates are for year-over-year earnings growth of 20.00% with revenue increasing by 9.91%.

Last quarter, the company’s Intelligent Cloud revenue surged 27%, driven by 59% expansion in the key Azure division. The Redmond, Washington-based firm’s other businesses, from Office and Windows to gaming and devices have also evolved and expanded.

More of the same in 2020 and beyond is expected after a strong 2019 in which Microsoft’s market valuation surged past $1 trillion.

Evercore ISI analyst Kirk Materne agrees with this statement according to a Jan. 22 note, that maintains an Outperform rating and price target of $180, in his report’s title “MSFT -- More Popular Than Baby Yoda.”

Influencing Factors…..

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

Momentum in Microsoft’s cloud computing platform — Azure — is likely to have contributed to the fiscal second-quarter performance.

Microsoft’s hybrid cloud is well positioned against market leader Amazon.com Inc. and third-place Alphabet Inc.’s Google.

Morgan Stanley concluded Microsoft is widening its lead as the preferred hybrid cloud vendor, with 42% using or likely to use Microsoft vs. 21% for AWS.

Credit Suisse’s survey showed Azure as the preferred cloud enterprise option for 76% of respondents.

“We remain constructive on the long-term opportunity for Microsoft, supported by our CIO survey that suggests share gains in the cloud as well as our bottom-up analysis indicating commercial cloud revenues could exceed $100bn in 5 years,” Credit Suisse analyst Brad Zelnick said in a Jan. 13 note. He raised his price target to $180 from $155, with a “blue-sky valuation” of $200.

As well, the company has been strengthening Office 365 and Dynamics 365 suite of solutions to boost enterprise productivity. The launch of HoloLens 2 and Azure Kinect DK, and the acquisition of Mover remain crucial in this regard. These initiatives are expected to have driven subscriber base.

Microsoft is striving to enhance the LinkedIn platform with robust AI, CRM capabilities at different levels, while maintaining user data privacy preferences. This is expected to have bolstered the adoption of LinkedIn’s subscription products, comprising membership, recruitment and education programs.

In the gaming segment, the tech giant is expected to have benefited from an increase in Xbox Live monthly active users and the adoption of Game Pass subscriptions.

Also, a seasonal uptick on holiday season and an improving PC shipment trend in the fourth quarter of 2019 are likely to have generated incremental revenues from Surface devices.

Microsoft unveiled the latest capabilities to IoT Central, Azure IoT Hub and Azure Maps, with an aim to deliver advanced IoT solutions with robust security capabilities. Moreover, the acquisition of Movere is expected to enhance Azure’s cloud-migration solution, Azure Migrate.

These new capabilities are likely to have bolstered the adoption of Azure, consequently contributing to the top line in the fiscal second quarter.

Option trade to consider: Buy the MSFT FEB 21 2020 165.000 CALLS at approximately $4.50.

(Buy in at the lowest price that you can due to the market pull-back)

Social media giant Facebook Inc. (NASDAQ:FB) will report earnings after the market closes. The consensus earnings estimate is $2.51 per share on revenue of $20.83 billion; but the Whisper number is higher at $2.63 per share.

Consensus estimates are for year-over-year earnings growth of 5.46% with revenue increasing by 23.15%.

FB stock is trading just below its all-time high with shares steadily rising over the last year. Facebook topped estimates on both the top and bottom line last quarter, and the street expects another earnings beat this quarter.

Facebook has done a great job monetizing its social media platform, and profits are up 42% per annum the last five years and are expected to rise an additional 43% next year.

FB shrugged off regulatory concerns, surging more than 56% last year. Recently, the company’s shares scaled new all-time highs. Facebook added more than 100 million daily active users over the last 12 months, which eventually boosted its stock.

Influencing factors.....

The stock trades at 23 times future earnings which is reasonable and given the robust growth estimates there appears to be a lot of value in the stock as long as Facebook is able to keep pace with estimates.

FB’s recent decision not to pursue advertising on WhatsApp, its popular platform of more than 1.5 billion members each month led Canaccord Genuity analyst Maria Ripps to say in a Jan. 22 note.....“Facebook has yet to find ways to meaningfully generate revenue from the service, leaving a large untapped opportunity for the social networking giant,” “The company will likely shift its focus to B2C [business-to-consumer] communications, which are one of the most common use cases for WhatsApp around the world, building on the introduction of several business-friendly tools and features over the past two years.”

Advertising accounted for 98.5% of the social networking giant’s $55.8 billion in 2018 revenue, and analysts expect it to make up 98.5% of its projected $70.5 billion 2019 revenue.

“Despite the challenging regulatory environment, growing antitrust scrutiny, ad targeting headwinds and transition to Stories [short user-generated photo or video collections], Facebook turned in a strong performance in 2019 and we believe the stock remains attractive,” Monness Crespi Hardt analyst Brian J. White said in a Jan. 21 note. He believes 2020 has “the potential to be another catch up year” for Facebook, whose stock soared 57% in 2019 after the Cambridge Analytica data fiasco in 2018. He gives Facebook a price target of $260, implying an 18% upside to its closing stock price on Thursday.

“We believe the sum of the parts are worth much more than Facebook is valued today,” White wrote. “Moreover, new opportunities in commerce, payment innovations and the long-term potential of VR, AR and brain-computing interfaces provide plenty of sizzle to keep investors interested in the Facebook story.”

Facebook’s fourth-quarter top line is expected to reflect the growing popularity of Stories. Notably, Instagram and WhatsApp are the top two popular Stories products globally.

The company’s new products like automated ads for small businesses, dynamic ads on Instagram Stories and branded content ads on Instagram are expected to have helped advertisers reach their targeted audience.

Also, Facebook’s initiatives to improve privacy, transparency and authenticity of ads and remove fake accounts from the platform are expected to have boosted user trust and engagement. These initiatives are likely to have contributed to Facebook’s advertising revenues.

The company launched two Pokemon games, titled Pokémon Tower Battle and Pokémon Medallion Battle, in the quarter on Facebook Gaming, which reportedly has more than 700 million monthly users.

Both games are free-to-play on PC using Facebook’s social platform and on mobile through Facebook Messenger.

Moreover, in December, the company acquired Spanish cloud gaming company, PlayGiga, in an effort to get a foothold in the market.

Facebook also bought Beat Games, developer of popular VR rhythm game, Beat Saber.

Of the 52 analysts who cover Facebook, 46 have buy or overweight ratings, 4 have hold ratings, and 2 have a sell rating, with an average price target of $246.02.

Option trade to consider: Buy the FB FEB 21 2020 220.000 CALLS at approximately $7.50.

(Buy in at the lowest price that you can due to the market pull-back)

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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