“Mentorship Program” Recommendations
- Week Beginning -
Monday, November 12, 2018

by Ian Harvey

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Option Trade – Verizon Communications Inc. (NYSE:VZ) Calls

Thursday, November 15, 2018

** OPTION TRADE: Buy VZ JAN 18 2019 60.000 CALL at approximately $1.30. Sell price is left to your own judgment.

(or alternatively : Place a pre-determined sell at $2.60.

Also include a protective stop loss of $0.55.)

Verizon Communications Inc. (NYSE:VZ), a provider of communications, information and entertainment products and services to consumers, businesses and governmental agencies, has shown strength through the year, and the stock is currently up 18.8%. Verizon has been strong even as weakness hit the overall market; posting strong quarterly numbers this earnings cycle.

Since the beginning of October, Verizon Communications has been one of the best stocks in the market, where the performance of Verizon stock has been truly impressive. VZ has risen almost 10% while the Dow Jones Industrial Average has fallen over 5%. Generating that rise against the grain of a weak market and a weak sector is close to extraordinary.

VZ has dipped its toe into media, picking up The Huffington Post, AOL, and assets from Yahoo! (now Altaba (NASDAQ: AABA), it spent a total of $10 billion on those deals, or about 4% of the market capitalization of Verizon stock.

About Verizon ……

Verizon Communications Inc, through its subsidiaries, offers communications, information, and entertainment products and services to consumers, businesses, and governmental agencies worldwide. The company's Wireless segment provides wireless voice and data services; Internet access on various notebook computers and tablets; multimedia, business-focused, and location-based services, as well as international travel services; and network access services to deliver various Internet of Things products and services.

Recent Movement…..

Verizon has interesting options in the media space. Verizon's new Oath unit consists of its three digital acquisitions. But Oath had a weak Q3, as its revenue declined, Verizon withdrew a 2020 target of $10 billion in revenue for the unit, and Oath CEO Tim Armstrong left on October 1.

Verizon recently announced that it has successfully completed the world's first 5G data transmission on a smartphone on a commercial 3GPP 5G New Radio network. The company had introduced the world's first commercial 5G service in Sacramento, CA, in October. A full phased 5G wireless network is likely to be offered in 2020.

The latest move will help Verizon to widen its lead over rivals in the race to 5G service and allow it to be the first to offer a 5G upgradeable smartphone on its network in 2019.

Influencing Factors…..

If Verizon continues its current strategy, it will keep throwing off impressive free cash flow. However, since VZ will probably launch 5G services in 2019, its capital expenditures likely will stay high due to increased spending on developing its network and adding more spectrums. But Verizon already has cut its capex forecast for this year, due to increased efficiencies, and it should be able to keep its spending down going forward as well.

While Verizon intends to launch next-generation 5G wireless residential broadband services in three to five U.S. markets in 2018, it continues to deploy the latest 4G LTE Advanced technologies to deliver faster peak data speeds and capacity for customers.

Verizon is investing in networks, creating platforms to add value for customers and maintaining a focused, disciplined strategy. It expects to gain traction with the 5G boom. The company also anticipates healthy improvement in margins on the back of tax savings and continued strong FiOS network and strategic services.

Past Earnings.….

Verizon recorded strong top-line growth led by solid service revenues and remains on track to benefit from the 5G era. The bottom line benefited from significant savings from the tax reform.

Adjusted earnings came in at $1.22 per share in Q3 compared with 98 cents in the year-earlier quarter and surpassed the Consensus Estimate of $1.19. Revenues came in at $32.61 billion, beating the Consensus Estimate of $32.54 billion and increasing 2.8% year over year.

For full-year 2018, Verizon reiterated its earlier guidance of both GAAP revenue and adjusted earnings per share increase by low single-digit percentage rates driven by expected savings from the tax reform and higher cash flow from operations.

Future Earnings…..

Wall Street brokerages expect that Verizon Communications will post sales of $34.35 billion for the current quarter. Verizon Communications reported sales of $33.96 billion during the same quarter last year, which indicates a positive year over year growth rate of 1.1%. The business is expected to issue its next quarterly earnings results on Tuesday, January 22nd.

Analysts….

Verizon had its price target lifted by research analysts at Morgan Stanley from $56.00 to $58.00 in a report issued on Monday, October 29th. The firm currently has an “overweight” rating on the cell phone carrier’s stock.

Also, Bank of America restated their buy rating on shares of Verizon Communications in a report released on Monday, October 22nd. They currently have a $58.00 price target on the cell phone carrier’s stock.

Several other analysts have recently commented on the company…..

  • ValuEngine raised shares of Verizon Communications from a “hold” rating to a “buy” rating in a report on Thursday.
  • Scotiabank set a $62.00 target price on shares of Verizon Communications and gave the company a “buy” rating in a research note on Wednesday, October 24th.
  • Barclays boosted their target price on shares of Verizon Communications from $50.00 to $53.00 and gave the company a “hold” rating in a research note on Wednesday, October 24th.
  • Finally, JPMorgan Chase & Co. boosted their target price on shares of Verizon Communications from $59.00 to $62.00 and gave the company an “overweight” rating in a research note on Wednesday, October 24th.

Seven investment analysts have rated the stock with a hold rating and eighteen have assigned a buy rating to the stock. The company has an average rating of “Buy” and a consensus target price of $55.93.

Summary

Owing to operational efficiency, Verizon stock has outperformed the industry with an average return of 10.1% compared with 1.7% growth recorded by the latter in the past three months.

VZ opened at $58.94 on Thursday. The company has a debt-to-equity ratio of 1.90, a quick ratio of 0.93 and a current ratio of 0.97. Verizon Communications has a 12 month low of $43.97 and a 12 month high of $59.40. The company has a market capitalization of $242.39 billion, a P/E ratio of 15.76, a price-to-earnings-growth ratio of 2.55 and a beta of 0.46.


Option Trade – Newell Brands Inc. (NYSE:NWL) Calls

Tuesday, November 13, 2018

** OPTION TRADE: Buy NWL JAN 18 2019 21.000 CALL at approximately $0.90. Sell price is left to your own judgment.

(or alternatively : Place a pre-determined sell at $1.80.

Also include a protective stop loss of $0.35.)

Newell Brands Inc. (NYSE:NWL), a worldwide marketer of consumer and commercial products with a portfolio of brands including Rubbermaid food storage, home organization and reusable container products, is down -25% over the last month vs. the S&P 500 which is down -6%.

But analysts have become more favourable to Newell after better-than-expected third-quarter results as well as the sale of its Pure Fishing and Jostens businesses for combined $2.5 billion, the latest in a series of asset sales aimed at increasing its focus on more profitable consumer products.

We think the recent sharp selloff in NWL shares is way overdone and would be aggressive buyers at these levels” writes Wells Fargo’s Bonnie Herzog. She sees shares soaring an 80% to $36.

Herzog believes the underperformance is down to a large shareholder unwinding their position (which could be close to being finished) as well as several concerns including: no news on asset sales, high leverage and exposure to China.

We’ve talked to many investors over the past few weeks and while there is a lot of interest in the stock, few investors are willing to buy the weakness, with many suggesting they believe in the long-term opportunity but would rather wait and buy the stock on an up-swing.

About Newell Brands …… 

Newell Brands Inc designs, manufactures, sources, and distributes consumer and commercial products worldwide. The company's Live segment offers household products, including kitchen appliances, gourmet cookware, bakeware and cutlery, food storage and home storage products, fresh preserving products, and home fragrance products; and baby gear, infant care, and health products primarily under Aprica, Baby Jogger, Ball, Calphalon, Chesapeake Bay Candle, Crock-Pot, FoodSaver, Graco, Mr.

Influencing Factors…..

The sale of Pure Fishing to Sycamore Partners and Jostens to Platinum Equity comes after Newell agreed earlier this year to sell cookware maker Waddington Group to Carlyle Group in a roughly $2.3 billion deal.

Newell, the maker of Rubbermaid and Crock-Pot slow cookers, has been unloading some of its businesses after more than doubling in size following its acquisition of Jarden Corp in 2016.

As part of a turnaround plan announced in May, Newell had said it would sell these businesses.

The Yankee Candles maker also ended a proxy fight with activist hedge fund Starboard Value LP in April, with activist investors Starboard and Carl Icahn placing their nominees on the company's board.

As part of its agreement with Icahn, Newell said in March its divestitures would bring in about $10 billion, ratcheting it up from its previous estimate of $6 billion.

Newell said on Wednesday that the gross proceeds from the divestitures to the two private investment firms are expected to be about $1.3 billion each and that both transactions are expected to close in the fourth quarter.

Past Earnings.….

Shares of Newell Brands climbed 15% after the company reported its third-quarter financial results. The maker of consumer goods like Calphalon cookware and Sharpie pens reported a modest decline in revenue from continuing operations, with factors including the bankruptcy of Toys R Us having a negative impact on Newell's top line. Yet the company managed to minimize the hit to its bottom line, and it boosted its full-year earnings guidance on hopes for a healthier holiday season. Newell still has plenty of work to do, but the report was a necessary first step toward a brighter future.

The company's third-quarter revenue actually fell short of analysts' estimates, falling 10.9% to $2.28 billion. However, its adjusted earnings per share checked in at $0.81, which was well ahead of estimates calling for $0.65 per share. The strong quarter enabled management to boost its full-year 2018 adjusted earnings-per-share guidance from a range of $2.45 to $2.65 up to $2.55 to $2.75 per share, while maintaining its sales guidance of $8.7 billion to $9.0 billion.

"Our third quarter results reflect solid progress in a number of areas as we continue to execute the Accelerated Transformation Plan announced in January of this year," said Michael Polk, president and CEO of Newell Brands, in a press release. "Our focus on margins and operating cash flow has begun to pay off as we generated strong sequential improvement on both metrics resulting from organization restructuring and diligent cost and working capital management."

Future Outlook…..

Going forward, Newell will continue focusing on its "Accelerated Transformation Plan," which is based on divesting noncore businesses, improving operations, and deleveraging the balance sheet. The company has made some progress closing three transactions -- the Waddington Group, Rawlings Sporting Goods Company, and Goody Products -- and lowering its net debt position by $2.5 billion, compared to the prior year. While there's much work left to be done, the better-than-expected bottom-line beat was easily enough to send its battered stock price higher.

Analysts….

Newell Brands had its price objective lifted by Deutsche Bank from $20.00 to $21.00 in a report issued on Monday, November 5th. The firm currently has a hold rating on the stock.

And, Newell Brands was upgraded by equities researchers at ValuEngine from a “sell” rating to a “hold” rating in a research note issued to investors on Thursday, November 1st.

Also, Morgan Stanley set a $23.00 target price on Newell Brands in a research report published last Tuesday. The firm currently has a hold rating on the stock.

As well, Newell Brands’ stock had its “buy” rating reaffirmed by stock analysts at Wells Fargo & Co in a research note issued to investors on Friday, November 2nd.

Several other analysts have recently commented on the company…..

  • Barclays reiterated a hold rating and issued a $24.00 target price on shares of Newell Brands in a research report on Sunday, October 7th.
  • Bank of America cut their target price on shares of Newell Brands from $30.00 to $25.00 and set a neutral rating for the company in a research report on Tuesday, August 7th.
  • Finally, Royal Bank of Canada reiterated a hold rating and issued a $24.00 target price on shares of Newell Brands in a research report on Wednesday, August 8th.

Thirteen equities research analysts have rated the stock with a hold rating, three have given a buy rating and one has issued a strong buy rating to the company. The stock presently has a consensus rating of Hold and a consensus target price of $26.60.

Insider News….

On August 13, Newell Brands Inc's CEO, Michael B. Polk, invested $206,300.00 into 10,000 shares of NWL, for a cost per share of $20.63.

Summary

Newell Brands traded up $0.34 during mid-day trading on Monday, hitting $20.24. The stock had a trading volume of 10,482,923 shares, compared to its average volume of 11,617,830. The company has a debt-to-equity ratio of 1.49, a quick ratio of 2.44 and a current ratio of 2.87. The company has a market cap of $9.40 billion, a PE ratio of 7.36, a price-to-earnings-growth ratio of 3.35 and a beta of 0.82. Newell Brands has a 12-month low of $15.11 and a 12-month high of $32.58.






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