Earnings Predictions
for the
Week Beginning October 02, 2017

Profit From Earnings Predictions

Earnings Seasons Officially Starts!

by Ian Harvey

October 02, 2017

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Earnings predictions for the week beginning October 02, 2017

-- profit from the official start of earnings season! --

There will be a lot more earnings reports for earnings season in another few weeks, but there is already the first trickle of reports—and several key companies will release reports in the week ahead.

Stocks finished the end of the third quarter with solid gains, with the S&P 500 Index (SPX), Nasdaq and Russell 2000 at all-time highs. The S&P rose to 2,518, up 0.7 percent for the week and a 3.9 percent gain for the quarter. The Nasdaq Composite (COMP) was up 5.8 percent for the quarter to 6,495, and the Russell was up 5.3 percent for the quarter at 1,491. The Dow Jones Industrial Average (DJIA) was up 4.9 percent for the quarter but off its high at 22,400.

It seems that the S&P 500 could also rally on into the fourth quarter, after positive gains for August and September, so far.

If history is a guide, the going will continue to be good for stocks into the end of the year.

For more on what investors should expect from Q3 earnings (besides the option trade suggestions below), check out our exclusive Membership reports at Stock Options Made Easy. Members are provided with option trade recommendations and the reasons why.  

Past Earnings

Total Q3 earnings are expected to be up +3.2% from the same period last year on +5% higher revenues. This would follow +11.1% earnings growth in 2017 Q2 on +5.5%, the second quarter in a row of double-digit earnings growth.

There will be another 20 companies reporting results this week, including 7 S&P 500 members.

The handful of notable earnings due will include reports from Cal-Maine Food, Lennar, Paychex, IDT, PepsiCo, Monsanto, Accuity, RPM International, Costco, Yum Brands, Constellation Brands and The Container Store.

Strategists say the fourth quarter could also be bullish for stocks, which defied all expectations for a correction during the late summer. As well, the Republican tax plan could keep the market buoyed.

Economic calendar

Monday

  • 9:45 a.m. Manufacturing PMI
  • 10:00 a.m. ISM manufacturing
  • 10:00 a.m. Construction spending
  • 2:00 p.m. Dallas Fed President Robert Kaplan

Tuesday

  • Vehicle sales
  • 8:30 a.m. Fed Gov. Jerome Powell discusses regulatory reform

Wednesday

  • 8:15 a.m. ADP employment
  • 9:45 a.m. Services PMI
  • 10:00 a.m. ISM nonmanufacturing
  • 2:15 p.m. Fed Chair Janet Yellen makes introductory remarks at St. Louis Fed community banking conference

Thursday

  • 8:30 a.m. Initial claims
  • 8:30 a.m. International trade
  • 9:10 a.m. Fed Gov. Jerome Powell at New York Fed on best practices
  • 9:15 a.m. San Francisco Fed President John Williams at St. Louis Fed banking conference
  • 9:30 a.m. Philadelphia Fed President Patrick Harker at Dallas Fed event on workforce
  • 10:00 a.m. Factory orders
  • 4:30 p.m. Kansas City Fed President Esther George at Dallas Fed event on workforce

Friday

  • 8:30 a.m. Employment report
  • 9:15 a.m. Atlanta Fed President Raphael Bostic
  • 10:00 a.m. Wholesale trade
  • 12:15 p.m. New York Fed President William Dudley in Brooklyn on monetary policy
  • 12:45 p.m. Dallas Fed's Kaplan at "Investing in America's Workforce" conference
  • 1:50 p.m. St. Louis Fed President James Bullard in St. Louis
  • 3:00 p.m. Consumer credit

A Look Back At Last Week’s Earnings Predictions

Earnings Results for the Week Beginning September 25, 2017

DATE TRADE GAIN
September 25, 2017 RHT OCT 20 2017 110.000 CALL P.P: 100%
September 26, 2017 CCL NOV 17 2017 65.000 CALL P.P: 53%
September 27, 2017 PRGS OCT 20 2017 40.000 CALL P.P: 187%

NOTE: P.P: – Potential Profit


Options Trades to Consider Based on Expected Earnings Reports:

Tuesday, October 03

Lennar Corporation (NYSE:LEN) – will report results before the market opens, with the homebuilder expected to earn $1.01 per share on $3.22 billion in revenues, but the Earnings Whisper number is for $1.06 per share. Earnings per share for the quarter will be unchanged from the year-earlier period though revenues would be up +13.6% from the same period last year.

Lennar shares have been strong performers this year, with the stock up +21.6% in the year-to-date period.

Lennar has said damage from Hurricane Irma was "mild" but predicted the storm would delay about 700 deliveries from Q4 2017 into the following fiscal year. Hurricane Harvey impeded about 120 new orders and deliveries in Q3 and is projected to hinder approximately 130 deliveries in Q4. Shares are in a flat base with 55.85 buy point with an early entry at 54.96. The results will come a week after KB Home (KBH) beat earnings and revenue forecasts, lifting shares sharply higher Friday.

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

Option trade to consider: Buy the LEN OCT 20 2017 52.500 CALL at approximately $1.30.

Paychex, Inc. (NASDAQ:PAYX) – will report earnings before the market opens and is expected to beat earnings. The consensus earnings estimate is $0.60 per share on revenue of $815.68 million and the Earnings Whisper number is $0.61 per share.

Consensus estimates are for revenue to increase by 3.84%. Short interest has decreased by 10.6% since the company's last earnings release while the stock has drifted higher by 4.3% from its open following the earnings release to be 1.6% above its 200 day moving average of $59.02.

Paychex’s investments in product development and focus on building its sales force support revenue growth. The company’s expansionary initiatives such as joint ventures and acquisitions support the long-term growth strategy.

The company’s recent acquisition of HROI will expand its services, consequently helping it to add to its customer base. Further, Paychex’s focus on small and mid-sized businesses looking for HR solutions is likely to provide growth opportunities.

Option trade to consider: Buy the PAYX OCT 20 2017 60.000 CALL at approximately $1.00.

Wednesday, October 04

PepsiCo, Inc. (NYSE:PEP) – the food and beverage behemoth is scheduled to announce its third-quarter financial results before the market opens. PepsiCo basically always surpasses earnings estimates, but the stock has slumped recently and is now up just above 7% year-to-date. Growing health awareness has hurt sales in the CSD category.

The consensus earnings estimate is $1.42 per share on revenue of $16.42 billion and the Earnings Whisper number is $1.46 per share. Consensus estimates are for year-over-year earnings growth of 1.43% with revenue increasing by 2.45%. Short interest has increased by 1.0% since the company's last earnings release while the stock has drifted lower by 1.7% from its open following the earnings release to be 0.4% below its 200 day moving average of $111.92.

Option trade to consider: Buy the PEP OCT 20 2017 110.000 PUT at approximately $0.90.

Thursday, October 05

Costco Wholesale Corporation (NASDAQ:COST)reports results after the market’s closes, with the retail giant expected to post $2.01 in EPS on $41.7 billion in revenues, up +13.8% and +14.2% from the year-earlier level, respectively. The revisions trend has been positive, with the current consensus EPS estimate for the quarter modestly up since the start of the period.

Investor sentiment going into the company's earnings release has 76% expecting an earnings beat. Overall earnings estimates have been revised higher since the company's last earnings release.

Option trade to consider: Buy the COST OCT 20 2017 165.000 CALL at approximately $2.80.

In Conclusion

Earnings should continue to be a positive for the market, and the Republican tax plan, announced last Wednesday, could also be a catalyst in the fourth quarter. If the plan is approved, it could add five to 10 percent to earnings growth in 2018.

Earnings growth in the current and coming quarters may not be as high as what has been seen in the first two quarters of the year, but it is nevertheless positive and steadily improving. The improvement is particularly notable on the guidance front, which has started showing up in reduced estimate cuts.

The fact that corporate earnings can continue to grow in a sustained fashion over the coming quarters is very impressive, especially noting the markets position in the economic and earnings cycle. Greater appreciation for this fact should not only add to confidence in expectations for the coming periods, but also help support stock prices.

The S&P has performed well in the usual 'sell in May' period which starts in May and goes until the end of October. It is up 5.2 percent in that period so far, and if it ends October with a gain the rally should continue with little problems.

As the market continues to run higher and higher, despite an array of potentially detrimental geopolitical and economic factors, it is important to refrain from getting too comfortable and complacent; the key-word now is “vigilance” – even though there seems to be little in the way of catalysts to de-rail the rally.

However, realizing that the markets could react in the short term to any further signs of escalation or de-escalation of the geopolitical risk, as well as the impact of the weather, will help plan for a successful and profitable week ahead.

Therefore, with the market uptrend still continuing, 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.

Now that the earnings season is starting to get into full-swing, members of Stock Options Made Easy will be receiving recommendations from our private option trading portfolios. There are two memberships available, “Cut-to-the-Chase” and “Armchair Trader” Membership Series, which provides you with the very best of recommendations.

As to the “trades to consider” mentioned in this article, you will notice that most options trades 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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