Earnings Predictions
for the
Week Beginning September 11, 2017

A Trickle Of Earnings Still To Come To Profit From

In The Week Ahead!

by Ian Harvey

September 11, 2017

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Earnings predictions for the week beginning September 11, 2017

-- continue to profit from a steady trickle of earnings! --

Wall Street's biggest bulls are certainly not too concerned these days about occurring events -- North Korea, drama on Capitol Hill and a second major hurricane in less than two weeks are certainly not rattling the markets to any great extent.

Even so, after closing higher for two straight weeks, U.S. stock markets slipped during the holiday-shortened week – however, this is normal for the S&P 500 Index (SPX) after Labor Day. The CBOE Volatility Index (VIX) posted its first weekly win in a month, and gold managed a third straight weekly advance.

Shares of major insurance companies fell in days ahead of Hurricane Irma's landfall in Florida, but managed to clinch a solid rebound Friday afternoon. XL Group and RenaissanceRe traded 5.8 percent and 4.13 percent higher, respectively.

However, home improvement and materials companies surged ahead of the storm's projected destruction in Florida. Home Depot climbed 1.10 percent and Lowe's added 1.13 percent on Friday, while Lumber Liquidators' stock added another 1.94 percent to its weekly gains.

Looking at the overall results for the major indexes for the past week:

  • The Dow Jones Industrial Average (DJIA) was down 0.9%, to end the week at 21,797.79.
  • The S&P 500 Index (SPX) was down 0.6% for the week, at 2,461.43.
  • The Nasdaq (COMP) was also down for the week by 1.2 percent at 6,360.19.
  • The VIX, CBOE's volatility index added 19.6%, to settle at 12.12.

Earnings So-Far

Total earnings in the quarter were up +11.6% on +6.1% higher revenues, the second quarter in a row of double-digit earnings growth for the S&P 500 index (earnings were up +13.5% in Q1). Unlike the year-over-year growth pace, the dollar amount of total earnings is expected to remain in record territory.

Moving Forward

Though earnings season is winding down, there are still plenty of upcoming market-moving events to trade. All eyes will be on Apple this week, when the iPhone 8 is revealed -- with one analyst targeting record highs ahead of the event.

Apple (AAPL) will finally unveil its much-anticipated new iPhone, which has been hyped for a year and contributed to the stock's sky-high valuation. Apple is scheduled to unveil its 11th-generation smartphone at a media event Tuesday at its new headquarters in Cupertino, Calif. Much is believed known about the new flagship handset, especially technical specifications. But some things, like its actual name, are not. (see option trade below)

Oracle (OCRL) will be among the few earnings reports due. As it continues a major transition to the cloud, Oracle will report fiscal first-quarter earnings after the market close Thursday. (see option trade below)

United Natural Foods (UNFI), which reports after the close Wednesday, is expected to post a 1.4% EPS decline to 69 cents on 7% revenue growth to $2.37 billion. (see option trade below)

Top automakers will try to boost their electric-vehicle street cred at a major car show in Germany. The Frankfurt Motor Show opens to the public Thursday with several new models due for release. The most exciting debut, by many accounts, is the Daimler (DDAIF) Mercedes-Benz AMG Project One, a two-seater hypercar boasting a Formula 1 hybrid powertrain.

Economic calendar

  • Monday: Markets closed in observation of the Labor Day holiday.
  • Tuesday: OPEC will release its monthly production report Tuesday. The cartel's July output hit the highest level since December despite the current output deal to remove 1.8 million barrels of oil from the market every day, which was extended in May. Russia and Saudi Arabia have signaled they may push to prolong the deal even further.
  • Wednesday: The International Energy Agency's monthly report and the U.S. Energy Information Administration will also report weekly stockpile and production data.
  • Thursday: The consumer price index is the big number of the week because investors haven't been this focused on inflation in at least a decade. Surprisingly subdued inflation pressure has undercut the Federal Reserve's rate-hiking consensus, and right now investors are betting that the next hike won't come until next June.
  • Friday: The Commerce Department is expected to report a softer 0.1% rise in retail sales in August, after a solid 0.6% the prior month. A hit to auto-related and other sales from Harvey is expected to take a short-term bite out of economic activity in Q3 before providing a modest tailwind in Q4.

A Look at Quarter 3

The markets are still a few weeks away from the start of the Q3 earnings season, but early indicators are pointing to a continuation of the positive earnings trend that was experienced in the last three quarterly reporting cycles.

Estimates for Q3 have come down since the quarter got underway, but the magnitude of negative revisions nevertheless compares favorably to other recent periods. In other words, Q3 estimates have come down, but the extent of the decline has been modest relative to other recent comparable periods.

Total Q3 earnings for the S&P 500 index are expected to be up +4.2% from the same period last year on +5.6% higher revenues. This would follow double-digit earnings growth in each of the preceding two quarters.

A Look Back At Last Week’s Earnings Predictions

Earnings Results for the Week Beginning September 04, 2017

DATE TRADE GAIN
September 06, 2017 RH OCT 20 2017 50.000 CALL P.P: 577%
September 07, 2017 BKS OCT 20 2017 7.000 PUT P.P: 75%
September 08, 2017 KR OCT 20 2017 22.000 PUT P.P: 128%

 NOTE: P.P: – Potential Profit

Options Trades to Consider Based on Expected Earnings Reports:

Tuesday, September 12

Apple Inc. (NASDAQ:AAPL) -- read article and recommended options trade -- “Option Trade - Apple Inc. (NASDAQ:AAPL) Calls - Thursday, September 07, 2017”

Note: The entry price for this options trade has decreased quite a lot from the original recommendation due to several days of backwards trading.

Apple is scheduled to unveil its 11th-generation smartphone at a media event Tuesday at its new headquarters in Cupertino, Calif. Much is believed known about the new flagship handset, especially technical specifications. But some things, like its actual name, are not.

Option trade to consider: Buy the AAPL OCT 20 2017 170.000 CALL at approximately $1.40.

Wednesday, September 13

Applied Genetic Technologies Corporation (NASDAQ:AGTC) -- scheduled to be issuing its quarterly earnings data before the market opens. Analysts expect the company to announce earnings of $0.14 per share on revenue of $13.43 million for the quarter.

Five research analysts have rated the stock with a hold rating and six have issued a buy rating to the company. Applied Genetic Technologies Corporation has an average rating of “Buy” and a consensus target price of $13.81.

Morgan Stanley raised its position in Applied Genetic Technologies Corporation by 27.3% during the 1st quarter. Morgan Stanley’s holdings in Applied Genetic Technologies Corporation were worth $1,162,000 at the end of the most recent quarter.

Investor sentiment going into the company's earnings release has 64% expecting an earnings beat. Overall earnings estimates have been revised higher since the company's last earnings release.

Option trade to consider: Buy the AGTC OCT 20 2017 5.000 CALL at approximately $0.45.

United Natural Foods, Inc. (NASDAQ:UNFI) -- which reports after the close, is expected to post a 1.4% EPS decline to 69 cents on 7% revenue growth to $2.37 billion. The stock has been trading below its 50-day moving average.

News of Whole Foods' acquisition by Amazon (AMZN) hit United Natural Foods hard in June; the company is a major supplier of Whole Foods.

Consensus estimates are for earnings to decline year-over-year by 1.43% with revenue increasing by 7.05%. Short interest has increased by 21.0% since the company's last earnings release while the stock has drifted lower by 10.3% from its open following the earnings release to be 14.7% below its 200 day moving average of $41.74. Overall earnings estimates have been revised lower since the company's last earnings release.

United Natural's sales have lagged the estimate for the last 10 quarters. It seems that United Natural has been struggling against tough grocery industry environment, laden with stiff competition, tight margins and aggressive promotions. Traditional grocery companies are facing competition from rival companies, which are strengthening their franchises and are offering alternative outlets for food and other staples. Such industry-wide headwinds are expected to dent the company's top line and margin, going ahead.

In addition to such challenges, United Natural's excessive reliance on its sole customer, Whole Foods Market, also poses as a formidable threat. The company has a partnership agreement with Whole Foods till 2025.

The impact of such ongoing headwinds and the lack of investor's confidence on the company are clearly visible in its share performance. Shares of United Natural have declined 19.2% in the past six months compared with the Consumer Staples sector's increase of 4.1%.

Although United Natural has been benefiting from acquisitions and restructuring initiatives, the same have not been able to completely offset the disadvantages arising out of the difficult grocery environment.

Option trade to consider: Buy the UNFI OCT 20 2017 35.000 PUT at approximately $1.70.

Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) -- the restaurant and retailing chain, will post fiscal fourth-quarter earnings results before the market opens. The consensus earnings estimate is $2.18 per share on revenue of $751.45 million and the Earnings Whisper number is $2.19 per share.

The company's guidance was for earnings of $2.10 to $2.20 per share. Consensus estimates are for year-over-year earnings growth of 2.83% with revenue increasing by 0.79%.

The stock has drifted lower by 11.8% from its open following the earnings release to be 9.5% below its 200 day moving average of $159.84. Overall earnings estimates have been revised lower since the company's last earnings release.

Shares have underperformed the market this year as the operations struggle through weakening industry trends. Cracker Barrel last posted a 2% dip in quarterly customer traffic. Its retail segment, which accounts for about 20% of the business, shrank by nearly 5%.

They're projecting lower sales growth, as comparable-stores sales shrink by 3.5% for the year.

Option trade to consider: Buy the CBRL OCT 20 2017 145.000 PUT at approximately $5.20.

Thursday, September 14

Oracle Corporation (NYSE:ORCL) -- continues a major transition to the cloud, Oracle will report fiscal first-quarter earnings after the market closes. The consensus estimate on revenue looks for the enterprise software and database company to report $9 billion, up 5% from the year-ago quarter. The consensus on adjusted EPS is 61 cents, up 11%. In fiscal Q4, Oracle beat on the top and bottom lines, with strong growth from its emerging cloud-computing operations.

Investor sentiment going into the company's earnings release has 85% expecting an earnings beat The company's guidance was for earnings of $0.59 to $0.61 per share. Overall earnings estimates have been revised higher since the company's last earnings release.

Option trade to consider: Buy the ORCL OCT 20 2017 52.500 CALL at approximately $1.00.

In Conclusion

The stock market’s intermediate term trend remains positive as the weekly NYSE, S&P 500, Nasdaq 100 and Dow Industrials A/D lines all made new highs a week ago.

The investor concerns about continued tensions with North Korea and the long term implications of hurricane Irma have caused some investors to move to the sidelines last week.  This did not change the positive technical development from the previous week but does allow for choppy trading in the week ahead.

Bullish sentiment according to AAII rose 4.3% to 29.3% which was not surprising. It is still at relatively low levels with the bearish sentiment at 35.7% down 4.2%.

The correction last week does appear to be having been a good buying opportunity for traders as good support levels were reached.

Realizing that the market's are going to continue to 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, which will help plan for a successful and profitable week ahead.

Therefore, with the market uptrend still under pressure, 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.

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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