Earnings Predictions
for the
Week Beginning June 25, 2018

Trading Capital Management!

Exiting Options Trades
BEFORE or AFTER Earnings Reports?

by Ian Harvey

June 24, 2018

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A Quick Review of Last Week’s Trades…..

Despite a dramatic week based on trade war fears, which punished stocks yet again and sending the Dow Jones Industrial Average (DJI) to its longest losing streak in over a year, Stock Options Made Easy “Earnings Predictions” members managed to profit from four(4) out of six(6) options trades recommended for consideration.

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!

Follow-up On Extra Trades To Consider Based on the Week Before…..

There were two trades that went in opposite directions to our predictions, but were up before reporting earnings so, for those traders that were still holding these trades, or for those wishing to enter the trades then, further options trades were recommended for consideration…..The Result….

1.      H & R Block Inc (NYSE:HRB) – option trade has hovered around the same entry cost most of last week.

2.      Adobe Systems Incorporated (NASDAQ:ADBE) – on Monday morning shot to over $8.00; which means that 100% potential profit was available to the astute trader.


“EARNINGS PREDICTIONS for LAST WEEK” - TAKING PROFITS AFTER EARNINGS REPORTS!

DATE TRADE GAIN
June 19, 2018 ORCL JULY 20 2018 45.000 PUT P.P: 191%
June 20, 2018 MU JULY 20 2018 57.500 PUT P.P: 20% (as advised - exit before report)
June 20, 2018 MU JULY 20 2018 60.000 CALL P.P: 45.5%
June 22, 2018 KMX JULY 20 2018 75.000 CALL P.P: 373%

TOTAL potential profit for these 4 trades= P.P: 629.5%.

Even deducting a total loss on the other two options trades – FDX and RHT – you would be 429.5% potential profit in front following the strategy mentioned below –“Trading Capital Management”! Obviously these two trades could make a comeback, similar to Etsy (.....read article.....), or even give back some of the capital used to purchase the options.

Don’t miss out – check out further options trades recommended for the week ahead by becoming a member of Stock Options Made Easy “Earnings Predictions”.

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.

Many new traders fail to consider the fact that it is wise for portions of their capital to be evenly distributed among the trades they are entering. Even experienced traders may be caught out by investing a higher amount of trading capital in a trade which turns out to be unsuccessful, or under-investing in other trades which succeed and could have covered or surpassed the loss sustained in the losing trade. Think of the adage regarding putting all your eggs (or even a greater percentage of those eggs) in one basket.

The way to maximize your potential profit is to allocate a specific amount of your trading capital that you wish to dedicate to each trade, and then calculate the number of contacts that this figure enables you to enter.

It is not the number of contracts in play, but the amount of money used to execute each trade! 

……continue reading this article……

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.

GETTING OUT WHILST THE GOING IS GOOD!

GREED CAN BE THE UNDOING OF A GOOD PROFIT!

Options Trades to Consider Based on Expected Earnings Reports:

Tuesday, June 26

JinkoSolar Holding Co., Ltd. (NYSE: JKS), a solar product manufacturer with operations based in Jiangxi Province and Zhejiang Province in China, will report earnings before the market opens.

The consensus earnings estimate is $0.07 per share on revenue of $714.55 million. Consensus estimates are for earnings to decline year-over-year by 75.00% with revenue decreasing by 14.86%.

Recently, solar stocks plummeted caused by China cutting solar incentives for the rest of 2018, which could reduce the country's solar installations by 30%-40% in 2018, a big deal considering China installed about half of all solar panels worldwide in 2018.

China cut feed-in tariffs for all solar projects and eliminated planned ground-mounted solar projects for the rest of the year, which is expected to reduce China's solar installations from 53,000 megawatts (MW) in 2017 to an estimated 35,000 MW in 2018, according to analysts from Roth Capital. The analysts also think there may be as much as 30,000 MW oversupply of solar panels in the second half of the year, and that would likely send panel prices dramatically lower.

JKS is a highly-leveraged company with debt exceeding equity by over 100%; and the ratio of 1.32x suggests that interest is not strongly covered, which means that lenders may be more reluctant to lend out more funding as JKS’s low interest coverage already puts the company at higher risk of default.

JKS’s high debt level indicates room for improvement. Furthermore, its cash flow coverage of less than a quarter of debt means that operating efficiency could also be an issue. In addition to this, its low liquidity raises concerns over whether current asset management practices are properly implemented for the small-cap.

Short interest has increased by 21.1% and overall earnings estimates have been revised lower since the company's last earnings release.

JinkoSolar's shares have lost 32.1% in a year against the industry’s rally of 21.3%. The downside might have been caused by stiff competition in the solar market.

Seven research analysts have rated the stock with a sell rating, one has assigned a hold rating and one has given a buy rating to the stock. The stock currently has a consensus rating of “Sell”.

Option trade to consider: Buy the JKS AUG 17 2018 14.000 PUT at approximately $1.30.

Wednesday, June 27

Minneapolis-based General Mills, Inc. (NYSE:GIS), a consumer-goods maker, will report before the market opens. The consensus earnings estimate is $0.74 per share on revenue of $3.92 billion; but the Whisper number is $0.76 per share. Consensus estimates are for year-over-year earnings growth of 1.37% with revenue increasing by 2.98%.

General Mills stock has underperformed the broader index so far this year, falling 24.6% YTD (year-to-date) as of June 18.

General Mills' margins remained soft in the third quarter, as the company is encountering escalated supply-chain expenses, owing to a rise in freight, commodities and operational costs. These headwinds are expected to linger, which is clear from management's raised input cost inflation outlook for fiscal 2018.

The company now expects input cost inflation of 4%, a point greater than the prior guidance. This also led to a lowered operating profit outlook for fiscal 2018, which gives out unfavorable signals for the fourth quarter.

Weakness in cereals and yogurt sales are likely to affect General Mills’ top line.

The rate of decrease in yogurt sales is expected to slow down on the back of new product launches and expansion into new categories. However, challenges persist in the near term. General Mills is also focusing on high-growth, high-margin avenues such as pet foods through its acquisition of Blue Buffalo, which is likely to increase its sales in fiscal 2019. However, the challenges from e-commerce players could be an upset.

General Mills’ management expects cost pressure to dent its margins for fiscal 2018. The company lowered its operating profit outlook and now expects it to decline 5%–6% in fiscal 2018. Inflation in commodities, including nuts, fruits, and grains, is expected to hurt the company’s profitability.

Driver shortages and carrier capacity constraints are expected to drive transportation costs higher and thus adversely impact General Mills’ margins. Management anticipates its operating profit to either decrease 1% or stay flat in fiscal 2018.

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

Tepid analysts’ estimates indicate that GIS stock could see further pressure if the company misses analysts’ expectations for the quarter. Most analysts are maintaining a “hold” recommendation for General Mills stock before its fiscal fourth-quarter earnings release.

Option trade to consider: Buy the GIS JULY 20 2018 45.000 PUT at approximately $1.65.

Bed Bath & Beyond Inc. (NASDAQ:BBBY), a specialty retailer of domestic merchandise and home furnishings, will report earnings after the market closes. Street consensus is expecting $0.32 in earnings per share on $2.75 billion in revenue for expected year-over-year decline in EPS of 45% on flat revenue growth. During the same period last year the company earned $0.53 and the stock has lost 9.2% on the year.

Bed Bath & Beyond stock is down 7% year-to-date (YTD) and 38.7% year-over-year (y/y). The stock has fallen from $70 down to the May '18 lows of $16.50 as revenue growth has slowed, expenses have remained elevated, and EPS growth has gotten crushed.

The company posted better than expected numbers last quarter, but issued disappointing guidance which drove the stock sharply lower. BBBY has since recovered most of its post-earnings losses, but sentiment remains very bearish on the company.

Same store sales and customer traffic have been falling, which is never a good sign for the health of retailer.

The company needs to significantly improve its online business, and the heavy investing needed to do so will continue to weigh on the company’s profits.

The company does not expect to return to earnings growth until 2020, and that assumes that its current investments in its e-commerce business start to pay off.

Technical indicators for BBBY are bearish. The stock has recent support above $18 and recent resistance below $22.

Of the 15 analysts who cover the stock, nine rate it a “hold”, one rates it a “sell”, and five rate it a “strong sell”.

With such a strong competitor in Amazon, the market will remain skeptical that the company will be able to compete until it is able to prove an ability to do so. There remain a lot of risks in the stock, which is now trading above its $19.25 average price target.

Option trade to consider: Buy the BBBY JULY 20 2018 20.000 PUT at approximately $1.25.

Thursday, June 28

Nike Inc. (NYSE: NKE), a seller of athletic footwear and athletic apparel worldwide, will report earnings after the market closes. The consensus earnings estimate is $0.64 per share on revenue of $9.39 billion; but the Whisper number is for $0.72 per share. Consensus estimates are for year-over-year earnings growth of 6.67% with revenue increasing by 8.22%.

Management's comments in late March made it clear that this long-anticipated recovery had just started. "We now see a significant reversal of trend in North America," CEO Mark Parker said. As a result, Nike is expected to reveal solid sales and profitability numbers in its quarterly report.

While the sports apparel industry niche in the U.S. is projected to hold steady at about 50 million people, China's should soar to 10 times that total over the next few years. That's a key reason why Nike believes it can expand sales there in the low to mid-teen percentage range between now and 2022.

Overall technical indicators for NKE are bullish with a strong upward trend. The stock has recent support above $72.00 and recent resistance below $76.00.

Short interest has decreased by 14.2% and overall earnings estimates have been revised higher since the company's last earnings release.

Of the 23 analysts who cover the stock, 10 rate it a “strong buy”, one rates it a “buy”, 11 rate it a “hold”, and one rates it a “sell”.

Option trade to consider: Buy the NKE JULY 20 2018 75.000 CALL at approximately $1.60.

Friday, June 29

Constellation Brands, Inc. (NYSE:STZ), a producer and marketer of beer, wine and spirits with operations in the United States, Canada, Mexico, New Zealand and Italy, will report before the market opens. The consensus earnings estimate is $2.42 per share on revenue of $2.05 billion; but the Whisper number is $2.53 per share. Consensus estimates are for year-over-year earnings growth of 3.42% with revenue decreasing by 3.09%.

Constellation Brands is on a roll with its sales booming despite a flat overall beer industry. And that healthy demand has allowed selling prices to spike, too.

Investors have responded to the improving top and bottom lines by pushing shares up dramatically over the last few years. However, the alcoholic beverage giant's stock has room to continue growing.

Sales jumped 10% in the company's core beer business during the fiscal year that just closed, and is expected to continue, and that expansion pace put Constellation Brands well ahead of peers like Anheuser-Busch InBev , whose revenue declined in the U.S. market last year.

Constellation Brands beverages are focused on the premium end of the market, after all, which is the fastest-growing niche right now.

Constellation Brands also has several offensive strategies in play for the new fiscal year, including the national launch of Corona Premier, the first major expansion in that brand's 25-year history.

Stepped-up marketing support for its other franchises, plus new sales opportunities in places like convenience stores, should also contribute toward another year of market-thumping sales gains that matches, or exceeds, last year's growth rate.

Constellation Brands has boosted earnings by 20% or more in each of the last five fiscal years. However, that impressive pace is set to decelerate to a still-substantial 10% increase in the coming years.

The company is projecting record operating cash flow this year, and is likely to use its financial strength to boost the value of the business.

It was management's bold decision to buy the rights to the imported beer franchises which put the company on its current blistering sales and profit pace. Executives have followed that game-changing acquisition up with many other solid purchases, including recent additions like Ballast Point and Funky Buddha breweries.

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

Option trade to consider: Buy the STZ JULY 20 2018 235.000 CALL at approximately $4.10 TO $4.50.

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.

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.


”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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”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.



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