by Ian Harvey
September 23, 2018
A Quick Review of Last
The Dow ended the week at an all-time high, and so far
stocks look set to close out the month of September with a gain.
For the week, the Dow finished up 2.3% at 26,743.50.
The S&P 500 was also up 0.8 percent at 2,929.67.
But, the Nasdaq Composite went in the opposite direction; finishing the week down 3.2% to settle at 7,986.96.
The Fed is expected to
announce a quarter point rate hike Wednesday, but is unlikely to cause too much
tension for the market; as well expect a signal that another hike is coming
later in the year.
The main area of concern
will be the focus on trade, and as the next round of U.S. tariffs on $200
billion in Chinese goods and China's retaliatory tariffs both go into effect
Also, the renegotiation of
the North American Free Trade Agreement, with a deadline of October 1, will be
watched by investors for any developments.
Expect the stock market to continue its upward trajectory for the next few months…..read the article “The Stock Market Is Expected To Continue Higher!”
Options Trades to Consider Based on Expected Earnings Reports:
Tuesday, September 25
The electronic products solutions company, Jabil
Inc. (NYSE:JBL), providing engineering, manufacturing and intelligent
supply chain solutions to companies in a variety of industries - automotive,
packaging, healthcare, retail and more, will report earnings before the market
opens. The market expects Jabil to deliver a
year-over-year increase in earnings on higher revenues when it reports results
for the quarter ended August 2018.
This electronics manufacturer is expected to post
quarterly earnings of $0.68 per share in its upcoming report, which represents
a year-over-year change of +6.3%.
Revenues are expected to be $5.40 billion, up 7.6%
from the year-ago quarter.
This electronics manufacturer has an established record of topping earnings estimates, especially when looking at the previous two reports. The company boasts an average surprise for the past two quarters of 4.34%.
For the last reported quarter, it was expected that Jabil would post earnings of $0.45 per share when it actually produced earnings of $0.46, delivering a surprise of +2.22%.
Over the last four quarters, the company has beaten consensus EPS estimates four times.
Jabil currently has an Earnings ESP of +3.82%, which suggests that
analysts have recently become bullish on the company's earnings prospects.
Option trade to consider: Buy the JBL OCT 19 2018 30.000 CALL at approximately $1.00.
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 for $0.62 per share on revenue of
$9.88 billion; but the Whisper number is for $0.66 per share. Consensus
estimates are for year-over-year earnings growth of 8.77% with revenue
increasing by 8.93%.
NKE has been a strong stock over the last year, with shares making
steady gains over the last year, and the stock up 34% year to date. Nike has a
very strong earnings track record, topping estimates on both the top and bottom
line for the last five quarters.
Nike recently returned to sales growth in the core U.S. market after
almost two years of modest declines, and management expressed optimism back in
June that this positive momentum will build into its new fiscal 2019. Its
international geographies are doing well, too, led by China and its 35% spike
Nike executives predicted that about half of its sales gains in the
coming years would come from newly introduced products. The company easily
outperformed that goal last quarter, as about 80% its growth was powered by
innovations in platforms like Air VaporMax and React.
Short interest has decreased by 54.0% and overall earnings estimates
have been revised higher since the company's last earnings release.
Option trade to consider: Buy the NKE OCT 19 2018 90.000 CALL at approximately $0.90.
Wednesday, September 26
CarMax, Inc. (NYSE:KMX) will report its earnings before the market opens. The
consensus earnings estimate is $1.22 per share on revenue of $4.70 billion;
however, the Whisper number is for $1.26 per share. Consensus estimates are for
year-over-year earnings growth of 24.49% with revenue increasing by 7.14%.
CEO Bill Nash and his team have pointed to pricing challenges as a key
factor keeping a temporary lid on sales growth. New-car dealerships have been
aggressive in their promotions lately, and that posture makes used cars
relatively less attractive.
Expect plenty of volatility related to the stock, as there will be
plenty of pressure added since CarMax has outperformed
the S&P 500 by a wide margin since its last report in late June, and
therefore, expectations for a follow through on some of the positive sales and
profit momentum that it showed in its fiscal first-quarter report.
Expenses are rising as the company shells out more on wages and on
bulking up its e-commerce infrastructure.
The consensus EPS estimate for the quarter has been revised 0.16% lower
over the last 30 days to the current level. This is essentially a reflection of
how the covering analysts have collectively reassessed their initial estimates
over this period. The Most Accurate Estimate is lower than the Consensus Estimate,
suggesting that analysts have recently become bearish on the company's earnings
prospects. This has resulted in an Earnings ESP of -0.68%.
Option trade to consider: Buy the KMX OCT 19 2018 75.000 PUT at approximately $1.20.
Bed Bath &
Beyond Inc. (NASDAQ:BBBY), a specialty retailer of
domestic merchandise and home furnishings, will report its earnings after the
market closes. The consensus earnings estimate is $0.50 per share on revenue of $2.95
billion; and the Whisper number is the same at $0.50 per share. Consensus
estimates are for earnings to decline year-over-year by 33.33% with revenue
increasing by 0.46%.
The decline in BBBY’s net margins is expected to offset the positive
effects of revenue growth and share repurchases, resulting in lower EPS in the
fiscal second quarter. Analysts expect BBBY’s net margins to fall from 3.7% in
the second quarter of 2017 to 2.3%.
Bed Bath & Beyond stock has struggled over the last few years. The
company has fallen victim to the pressure of e-commerce, and so far it has
failed to make meaningful improvements to its online business. Earnings have
suffered as a result. Profits have fallen by 11.6% per annum over the last five
years, and are expected to drop another 26.9% this year.
The stock has fallen 14.2% on the year.
Factors affecting the stock…..
Despite Raymond James upgrading BBBY from “underperform” to “market
perform,” more than half of the analysts favour a “hold”, with 36.4% favouring a
“Sell” recommendation. Analysts had set an average price target of $17.82, which represents a
potential decline of about 7.1% from its current stock price.
Short interest has increased by 25.8% and overall earnings estimates have been revised lower since the company's last earnings release.
Option trade to consider: Buy the BBBY OCT 19 2018 17.500 PUT at approximately $0.45.
McCormick & Company,
Incorporated (NYSE:MKC), a manufacturer, marketer and
distributer of spices, seasoning mixes, condiments and other flavorful products
to the food industry, including retailers, food manufacturers and foodservice
businesses, will report earnings before the market opens. Analysts' forecast the consensus EPS
for the quarter is $1.26. The reported EPS for the same quarter last year was
average, analysts expect McCormick's third quarter sales to rise by 15% to
$1.36 billion. That top-line result would keep revenue expanding at about the
same rate as in recent quarters.
This spices and seasonings company
has seen a nice streak of beating earnings estimates, especially when looking
at the previous two reports. The average surprise for the last two quarters was
9.78%. And, recent estimates have been moving higher for McCormick. McCormick currently has an Earnings
ESP of +0.99%, which suggests that analysts have recently become bullish on the
company's earnings prospects.
has bucked the negative trend in the consumer packaged-foods industry with a
lot of help from its $4 billion acquisition of the hit French's and Frank's
condiment franchises. And investors have high expectations for the third
quarter earnings results. That purchase allowed sales to jump 19% last quarter
even though its core spice business expanded by a more modest 3%.
are looking for both segments to show growth in the quarter that just closed,
in a demonstration of both McCormick's attractive food niche positioning and
its strong global marketing and distribution infrastructure. Look for profit
margins to continue expanding, too, as sales shift toward the more profitable
key factor behind McCormick's recent market-thumping stock performance has been
its rising profitability. At a time when many consumer packaged-foods companies
are facing margin pressure, the spice giant is successfully raising prices,
which supports management's argument that the flavorings industry is a
particularly attractive food niche.
McCormick is benefiting from aggressive cost cuts and a tilt in the sales base
toward condiments with higher margins than many of its traditional flavorings.
Option trade to consider: Buy the MKC OCT 19 2018 135.000 CALL at approximately $1.15.
Friday, September 28
BlackBerry Ltd (NYSE: BB), operating
as an enterprise software and services company focused on securing and managing
endpoints in the Internet of Things, will report earnings before the market
opens. The consensus earnings estimate is $0.01 per share on revenue of $213.48
million; however, the Whisper number is for $0.03 per share. BlackBerry posted
earnings per share of $0.05 in the same quarter last year, which would indicate
a negative year over year growth rate of 80%.
Although it was a good 2017 for BlackBerry with investors showing
interest in the company's new enterprise security business model, however, valuation
and profitability concerns have hampered the stock in 2018.
BlackBerry‘s stock has underperformed the broader technology sector, and
the overall market, of late. While the NASDAQ has rallied by about 16% year to
date and by about 120% over the last five years, BlackBerry’s stock is down by
about 11% year to date and has remained almost flat since 2013.
While the company has been turning around its operations, exiting less
profitable businesses such as handsets and eliminating costs via layoffs over
the last few years, its revenues have seen a precipitous decline, falling from
about $11 billion in FY’14 to just about $932 million in FY’18. As the company
has largely run out inefficiencies and costs to eliminate, driving
profitability will have to be aided by reversing its revenue declines going
Blackberry’s near-term outlook for revenue growth also remains mixed.
Revenues are projected to decline by almost 5% this year, as growth in Software
and Services sales is unlikely to offset declines in the company’s high-margin
Service Access Fee business (which saw revenues decline by 58% year-over-year
in the most recent quarter).
embedded software, which BlackBerry licenses to automotive vendors to power
infotainment systems, may be ripe for disruption. BlackBerry
also has bets in several other fledgling or highly competitive areas such as
autonomous driving systems, fleet tracking and the Internet of Things, but
meaningful monetization may still be a long way off, and there is also a risk
that BlackBerry may be spreading itself too thin.
As well, Facebook
Inc. is suing BlackBerry Ltd. for patent infringement, escalating the legal
battle between the two companies over protected technology – which provides
another problem for BlackBerry to deal with.
Option trade to consider: Buy the BB OCT 19 2018 10.000 PUT at
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.
OUT WHILST THE GOING IS GOOD!
GREED CAN BE THE UNDOING OF A GOOD PROFIT!
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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?”
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.