Earnings Predictions 
for the
Week Beginning October 19, 2020

Profiting From Trading Options!

Compare Exiting Before and After Earnings!

by Ian Harvey

Sunday, October 18, 2020


Options Trades to Consider Based on Expected Earnings Reports:

A QUICK SUMMARY OF TRADES

Tuesday, October 20, 2020

Option trade to consider: Buy the PG NOV 20 2020 145.000 CALL at approximately $3.20 (up to $3.50).

Option trade to consider: Buy the SNAP NOV 20 2020 28.000 CALL at approximately $2.30 (up to $2.50).

Wednesday, October 21, 2020

Option trade to consider: Buy the WGO NOV 20 2020 55.000 CALL at approximately $4.50 (up to $5.00).

Thursday, October 22, 2020

Option trade to consider: Buy the TSCO NOV 20 2020 155.000 CALL at approximately $5.80 (up to $6.50).

Option trade to consider: Buy the AAL NOV 20 2020 12.000 PUT at approximately $1.00 (up to $1.20).



Tuesday, October 20, 2020


Consumer products staple Procter & Gamble Co (NYSE:PG) will report earnings before the market opens. The consensus earnings estimate is for $1.43 per share on revenue of $18.21 billion; but the Whisper number is a bit higher at $1.49 per share.

Consensus estimates are for year-over-year earnings growth of 4.38% with revenue increasing by 2.31%.

Procter & Gamble remains a leading company in personal care products. For much of its 180-year history, brands such as Tide laundry detergent, Bounty paper towels, and Gillette razors produced tidy profits for the personal care giant.

Influencing Factors.....

Procter & Gamble’s sales have been gaining from the spike in demand for household cleaning, personal health and cleansing products, mostly in North America and China, since the onset of the coronavirus pandemic. The relevance of the company’s products and categories in consumers' lives has increased with the pandemic.

Panic-buying and pantry-stuffing for products like Tide detergent and Bounty paper towels pushed organic sales higher by 10% during the peak shutdown period in April and May.

In late July the company gave investors a few reasons to follow this metric closely when it revealed a growth slowdown to 6% in the fiscal fourth quarter. That beat expectations and suggested a strong market share performance against peers like Kimberly-Clark.

Expect that the increased focus on home, more time at home, and more meals at home with related consumption impacts are likely to have contributed to Procter & Gamble’s performance.

Short interest has decreased by 17.9% and overall earnings estimates have been revised higher since the company's last earnings release.

The first-quarter fiscal 2021 performance is likely to have benefited from the continued functioning of its businesses and strong demand for its products. It is expected to have witnessed continued growth in organic sales, driven by a continued increase in organic shipment volume and better pricing.

Under current CEO David S. Taylor, it has resembled a start-up in some respects, buying products like Native deodorant that have sold well online. Thus, despite selling mostly commoditized products, it continues to drive growth.

Management has also been focusing on productivity and cost-saving plans, which might have cushioned margins in first-quarter fiscal 2021. It has been driving cost savings and efficiency improvement in all facets of business, delivering strong cost and cash productivity.

P&G has already cut billions of dollars out of its expense infrastructure since 2013, but management isn't done slashing costs.

Look for more aggressive cost-cutting moves in this report. These initiatives will ultimately show up in P&G's operating margin and support robust free cash flow while keeping profitability comfortably above 20% of sales.

Summary.....

P&G surpassed expectations on core metrics like these in each of its last few earnings reports and has a good shot at surprising again when it reports today.

Option trade to consider: Buy the PG NOV 20 2020 145.000 CALL at approximately $3.20 (UP TO $3.50).

Option trade to consider: Buy the PG NOV 20 2020 145.000 CALL at approximately $3.20 (up to $3.50).

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

STOP-LOSS – $1.30


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 $0.05 per share on revenue of $547.24 million; but the Whisper number is slightly better at ($0.04) per share.

Consensus estimates are for earnings to decline year-over-year by 66.67% with revenue increasing by 22.64%.

In the last reported quarter, its subscriber growth — reflected by Daily Active Users (DAUs) — increased 35 million on a year-over-year basis and 9 million sequentially.

Snap expects DAU between 242 million and 244 million for the third quarter of 2020, implying year-over-year growth of 15-16% or 32-34 million daily active users. The Consensus Estimate for global DAUs is currently pegged at 243 million.

Social networking company Snap Inc. has been on a roll amid the COVID-19 pandemic. It beat revenue estimates by a wide margin in Q2 FY 2020 as advertising sales rebounded, and its shares have dramatically outperformed the market thus far this year.

Snap growth is expected to continue when it reports earnings. Analysts expect quarterly losses to widen on adjusted earnings per share (EPS) basis as revenue rises at a strong, but slower pace, compared to the same quarter a year ago.

Snap's revenue growth has been robust since it went public. Revenue rose a healthy 17.0% pace in Q2 FY 2020, but that was the slowest growth in 14 quarters.

Influencing Factors.....

Short interest has decreased by 34.4% since the company's last earnings release.

Snap has been benefiting from a spike in the usage of Snapchat. The company has been focused on continuously adding a set of innovative features like Lens Studio 2.0, Camera Kit, Snap Minis and Bitmoji for Games, which is making Snapchat more attractive for users and advertisers.

Snap's daily active users have climbed steadily for the past five quarters after plateauing at between 186 million and 191 million users for six straight quarters ending Q1 FY 2019. Since Q2 FY 2019, Snap's daily active user base has been at least 203 million. The company's DAU growth accelerated YOY each quarter from Q2 FY 2019 through Q1 FY 2020. That pace slowed slightly in Q2 FY 2020 to 17.2% YOY as Snap reported an all-time high of 238 million daily active users. That record could be topped in Q3, as analysts predict 243.9 million daily active users, a slight slowdown in YOY growth relative to the previous quarter at 16.1%.

In addition to strong adoption of AR Lenses, Discover content and Shows are expected to have driven user growth amid coronavirus-led social distancing guidelines.

The growing adoption of Snapchat among Gen Z (13-24 years) is expected to have driven DAUs. Markedly, it is a larger platform than Facebook FB, Instagram and Twitter TWTR among this demography.

Analysts Thoughts.....

Bank of America Securities analyst Justin Post delivered an upbeat Snap assessment in September, advising that new initiatives including personalized public profiles and user-accessible advanced analytics could act as "potential engagement drivers," increasing revenue.

Wall Street is highly bullish on Snap's long-term outlook, which makes sense given 60%-plus upside since the first trading day of 2020. Analyst consensus now stands at a "Strong Buy" based upon 22 "Buy," 6 "Hold," and just 1 "Sell" recommendation.

Summary.....

Snap stock has significantly outperformed the broader market, with a trailing 1-year total return of 96.2%, more than 5 times the S&P 500's total return of 18.4%.

The stock has been consolidating for the past week and could reach the 2017 high in a pre-earnings speculative bid. It's also possible that an analyst or two will raise price targets heading into the release, also underpinning buying interest.

Option trade to consider: Buy the SNAP NOV 20 2020 28.000 CALL at approximately $2.30 (UP TO $2.50).

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

STOP-LOSS – $0.95

SELL – $4.60)


Wednesday, October 21, 2020


The RV giant Winnebago Industries, Inc. (NYSE:WGO), together with its subsidiaries, manufactures and sells recreation vehicles primarily for leisure travel and outdoor recreation activities, will report earnings before the market opens. The consensus earnings estimate is for $0.90 per share in its upcoming report, which represents a year-over-year change of -10.9%, on revenue of $699.43 million, up 31.9% from the year-ago quarter.

For the last reported quarter, it was expected that Winnebago would post a loss of $0.41 per share when it actually produced a loss of $0.26, delivering a surprise of +36.59%.

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

The recreational vehicle giant faced unprecedented demand pressures during the early weeks of the pandemic, but production appears to have picked right back up since then. The company might even be positioned for faster sales gains as consumers shift spending toward vacationing in outdoor environments that are closer to home.

Influencing Factors.....

Winnebago’s Consensus Estimate has recently become bullish on the company's earnings prospects. This has resulted in an Earnings ESP of +17.22%.

Sales dived 41% year over year in the prior fiscal quarter, which was dominated by COVID-19 dealership closures. Yet CEO Michael Happe and his team said at the time that the May selling month brought a "strong rebound in dealer demand."

That boost was reflected in a surging order backlog, which jumped 87% for its towable products and doubled for its motorized RV division.

Winnebago has been consistently gaining ground on the company's market-share position, including by pushing market share to 11.7% of the industry through the April contraction.

In addition to new pandemic-related costs, Winnebago had to completely restart much of its manufacturing and supply chains in the period. It is also dealing with temporary charges related to integrating its recently acquired Newmar brand.

All these challenges predict a profitability decline for the fiscal fourth quarter, with earnings falling to about $0.90 per share from $1.03 per share a year ago despite all the extra sales being added from the Newmar business. Management should make some comments about underlying profitability trends, though, that strip out those temporary issues.

Winnebago enjoyed roughly steady profitability, with operating income landing at just under 9% of sales in both fiscal 2019 and 2018. That figure will drop in this report, but it's not clear yet by how much.

Analysts Positivity.....

Winnebago Industries had its price target hoisted by equities researchers at Citigroup from $61.00 to $74.00 in a report released last Thursday. The firm presently has a "neutral" rating on the construction company's stock. Citigroup's price target suggests a potential upside of 37.29% from the company's current price.

Three investment analysts have rated the stock with a hold rating and six have issued a buy rating to the company. The stock has an average rating of "Buy" and an average target price of $69.63.

Other comments by analysts.....

  • Wolfe Research raised Winnebago Industries from a "peer perform" rating to an "outperform" rating and set a $59.00 price objective on the stock in a report on Tuesday, September 22nd.
  • Zacks Investment Research downgraded Winnebago Industries from a "strong-buy" rating to a "hold" rating and set a $66.00 price objective on the stock in a report on Thursday, August 6th.
  • Truist Financial dropped their target price on shares of Winnebago Industries from $72.00 to $68.00 in a research report on Monday, September 14th.
  • Finally, Sidoti upgraded shares of Winnebago Industries from a "neutral" rating to a "buy" rating and set a $63.00 target price for the company in a research report on Friday, September 25th.

Summary.....

Looking ahead Winnebago management may make some positive predictions about demand trends for the company's recreation products. A high order backlog might point to a strong start to fiscal 2021. The company is entering the year with its strongest portfolio to date, too, as it covers luxury motorized RV products, towable camping units, and boating products.

Given its dominant industry position, those assets should give Winnebago a good shot at securing more than its fair share of any growth that the RV niche experiences over the next few years.

Option trade to consider: Buy the WGO NOV 20 2020 55.000 CALL at approximately $4.50 (UP TO $5.00).

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

STOP-LOSS – $1.80

SELL – $9.00)


Thursday, October 22, 2020


Tractor Supply Company (NASDAQ: TSCO), a rural retailer of farming equipment, will report earnings before the market opens. It is engaged in supplying the needs of recreational farmers and ranchers as well as tradesmen and small businesses. The consensus earnings estimate is for $1.34 per share, a year-over-year change of +28.9%, on revenue of $2.39 billion, up 20.3% from the year-ago quarter.

For the last reported quarter, it was expected that Tractor Supply would post earnings of $2.62 per share when it actually produced earnings of $2.90, delivering a surprise of +10.69%.

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

The rural lifestyle retailer is now comfortably trouncing the broad market in 2020 and leaving behind bigger peers like Walmart through mid-October.

That rally implies there are some high expectations for Tractor Supply's upcoming earnings report.

Influencing Factors…..

Estimates have been trending higher, thanks in part to this earnings surprise history.

Business in the fiscal second quarter benefited from unprecedented demand once the initial shock of COVID-19 closures tapered off. Sales shot higher by 30.5% at existing locations and more than doubled in the online selling channel through late June.

There's a wider range of outcomes in this metric since Tractor Supply likely saw volatile consumer demand over the quarter.

Management is also pouring resources into ultra-fast fulfillment options like same-day delivery. These offerings are helping it win market share but may pressure operating margin over the short term.

Clearly, the chain's merchandising focus and its aggressive push into e-commerce has helped it make the most of consumer shopping changes around the pandemic.

Tractor Supply's store launch outlook is a good indication that management sees good gains. Executives quickly ramped up the pace of new store openings starting in late spring, which shows that they're bullish about the potential of their multichannel selling strategy.

More robust expansion through the second half of 2020 would be a positive sign for the business heading into the next fiscal year.

Option trade to consider: Buy the TSCO NOV 20 2020 155.000 CALL at approximately $5.80 (UP TO $6.50).

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

STOP-LOSS – $2.40

SELL – $11.60)   


The world's largest airline American Airlines Group Inc (NASDAQ: AAL) will report earnings before the market opens. The consensus earnings estimate is for loss of $5.62 per share in its upcoming report, which represents a year-over-year change of -495.8%, on revenue of $2.80 billion, down 76.5% from the year-ago quarter.

For the last reported quarter, it was expected that American Airlines would post a loss of $6.75 per share when it actually produced a loss of $7.82, delivering a surprise of -15.85%.

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

Influencing Factors.....

The estimate revision for the bottom line does not indicate a rosy picture, with the Consensus Estimate for the third-quarter bottom line widening to a loss of $5.62 per share from $3.89 loss 90 days ago.

American Airlines’ third-quarter performance is likely to have been dented by the coronavirus-induced weak passenger revenues as air-travel demand remains tepid. The spike in the coronavirus cases in some parts of the United States during the three-month period under consideration (July-September) is likely to have affected the already bleak air-travel demand, thereby hurting passenger revenues further.

Suggestive of the prevalent gloomy scenario, the Consensus Estimate for passenger revenues indicates a 79.1% plunge from the number reported in the year-ago quarter. To mitigate the extreme demand depression, the carrier is trimming its capacity. The Consensus Estimate for consolidated available seat miles (a measure of capacity) implies a 59.6% slump from the number reported in the year-earlier quarter. Also, the Consensus Estimate for traffic (measured in revenue passenger miles) suggests a 76.2% decline from the prior-year quarter’s reported figure.

With traffic decreasing at a faster rate than capacity cutbacks, consolidated load factor (% of seats filled by passengers) is likely to have taken a beating in the third quarter. This means that the Consensus Estimate for American Airlines’ third-quarter 2020 consolidated passenger load factor stands at a dismal 52%, hinting at a decline from 86% reported in third-quarter 2019.

Also, the Consensus Estimate for third-quarter passenger revenues per available seat miles (PRASM: a key measure of unit revenues) is likely to be 7.64 cents, implying a 47.3% reduction from the figure reported in the year-ago quarter.

As well, due to the capacity cuts, consolidated operating costs per available seat mile excluding fuel and special items or non-fuel unit costs are likely to have escalated in the to-be-reported quarter. The Consensus Estimate for third-quarter non-fuel unit costs (consolidated) is likely to be 18.7 cents, implying a 27.7% increase from the figure reported in the year-ago quarter.

Analysts Thoughts.....

140166 downgraded shares of American Airlines Group from a neutral rating to a negative rating in a report published last Tuesday morning. They currently have $8.00 target price on the airline’s stock.

Eleven equities research analysts have rated the stock with a sell rating, five have issued a hold rating, three have issued a buy rating and one has issued a strong buy rating to the stock.

Conclusion…..

The latest stress test on U.S. airlines shows American Airlines will be at high risk of default by the end of the year as the coronavirus pandemic decimates their industry.

The airlines can’t recover independently.  The future of the airlines is linked to factors out of their control,” RapidRatings CEO James Gellert said.

RapidRatings conducts risk assessments and stress tests for major global firms like McDonald’s (MCD) and Unilever (UL), to determine if a company can withstand financial shocks like the COVID-19 crisis.

Gellert says, “Over the last 20 years 90% of companies that have failed have been rated 40 and below” and the results of RapidRatings’ most recent year-end stress test sound an ominous warning for the airlines.

“All the major airlines in the U.S. are falling well into that 40 and below area, with American falling the most to 16,” Gellert warned.

Option trade to consider: Buy the AAL NOV 20 2020 12.000 PUT at approximately $1.00 (up to $1.20).

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

STOP-LOSS – $0.40

SELL – $2.00)        


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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