A Preview of Tyson Foods, Inc. (TSN) Ahead of Earnings

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Tyson Foods, Inc. (AMGN) is a food product company operating in five continued segments: Chicken, Beef, Pork, Prepared Foods, and International. The stock is currently trading around $44.61 at the upper end of its 52 week range of $36.12-$45.10. The stock has been out performing the market this year rallying 11.27% year to date. TSN is scheduled to report earnings on Monday before the opening bell, and the stock is down $0.23 or 0.52% on the session ahead of the close.

Over the past 8 quarters TSN has rallied on earnings day 6 times with an average move of 4.7%. The stock appears very bullish on a chart going into the release having traded above the Ichimoku Cloud since mid-April on the daily bars. Investors are mostly watching how company’s profits are effected after a bird flu wiped out millions of chickens. strong momentum in most business segments drove sales and helped post modest results in the past few quarters and is expected to continue this trend. Corn prices are at a record low helping with margins of the company. With the stock trading way above the cloud, great earnings history and overly bearish investors it is hard to justify anything but a long position in TSN.

The options market is currently implying a move of around $2.50 or 5.6% in TSN by August 21st giving us targets of $42.11 and $47.11.

Public-Private Disconnect

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I love puzzles… crosswords, sudoku, solitaire. Theyʼre fun, challenging and sometimes you even find the solution. If only we could say the same of economics.

Today the U.S. Bureau of Economic Analysis released preliminary data indicating the economy grew 2.3 percent in the first quarter, well ahead of the sluggish 0.6 gain in the first quarter. This is clearly welcome news, yet completely opposite the negative aggregate 2Q sales reported thus far by 324 companies in the S&P 500.

IAPublicPrivate-1

Wells Fargo Chief Economist John Silvia explains the divergence as a split level economy. Whereas “Consumer spending led the second quarter… and residential investment also came in strong… structures and equipment spending remain a drag.” In other words, people are spending but businesses arenʼt.

Thereʼs a secondary explanation as well. Total consumer spending (ex-health care) accounts for 56 percent of U.S. GDP, but consumer sector stocks only make up 23 percent of the S&P 500 Index. So the robust buying cited by Dr. Silvia has a lesser weighting in overall corporate earnings data than in the governmentʼs GDP figures. Puzzle solved!

We see two messages here:

  • For CEOs, celebrate your sales growth and boldface the figures across the top of your earnings release. Your growth distinguishes you.
  • For investors, focus only on those companies demonstrating top line success, and since the market has run over three years without a 10 percent correction, avoid high P/E stocks.

Applying this logic to the S&P 500 Index, we identify ten companies growing sales at least 20 percent, and trading with a Price to Earnings ratio under 17x (the current market average). We would also note the group is up 17 percent YTD, well ahead of the broader index. Apple Inc. (AAPL), Avago Technologies Limited (AVGO), D.R. Horton Inc. (DHI), Gilead Sciences Inc. (GILD), Laboratory Corp. of America Holdings (LH), Mallinckrodt (MNK), Mylan N.V. (MYL), Signet Jewelers Limited (SIG), Skyworks Solutions Inc. (SWKS), Zimmer Biomet Holdings, Inc. (ZBH).

Amgen Inc. (AMGN) Earnings Preview

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Amgen Inc. (AMGN) is a biotechnology company engaged in discovering, developing, manufacturing and delivering human therapeutics to pharmaceutical wholesale distributors in the United States and Europe. The stock is currently trading around $171.17 at the upper end of its 52 week range of $124.76-$174.80. The stock has been out performing the market this year rallying 6.61% year to date. AMGN is scheduled to report earnings after the closing bell today, and the stock is down $0.30 or 0.17% on the session ahead of the close.

Over the past 12 quarters AMGN has rallied on earnings day 6 times with an average move of 3.38%. The stock appears to make no stable trend on a chart going into the release having broken through the upside of the Ichimoku Cloud in late July on the daily bars. Over the past 12 quarters AMGN has rallied on earnings day to expiration 7 times with an average move of 4.01%. Investors are hoping for another surprise since the average earnings surprise over the last four quarters is 13.98% as well as increasing sales due to orders from major institutions. With the stock trading way above the cloud, good earnings history and strong sales support it is hard to justify anything but a long position in AMGN.

The options market is currently implying a move of around $6.37 or 3.7% in AMGN by this Friday’s close giving us targets of $164.80 and $177.54.

Trade: Buy this week’s 175-177.5 Vertical call spread for $0.62
Risk: $62 per lot
Reward: $1.88 per lot
Break Even: $175.62

Earnings Preview Ahead of the Close for Seagate Technology PLC (STX)

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Seagate Technology PLC (STX) is the provider of electronic data storage products including hard disk dries, commonly referred to as disk drives, hard drives, or HDDs. The stock is currently trading around $50.72 at the lower end of its 52 week range of $44.46-$69.40. The stock has been under performing the market this year falling 23.74% year to date. STX is scheduled to report earnings before the opening bell tomorrow, and the stock is up $1.30 or 2.63% on the session ahead of the close.

Over the past 12 quarters STX has rallied on earnings day 5 times with an average move of 5.23%. The stock appears to be reversing and starting a bullish trend on a chart going into the release having ripped to the bottom of the Ichimoku Cloud in late July on the daily bars. Over the past 12 quarters STX has rallied on earnings day to expiration 5 times with an average move of 6.38%. Investors are hoping to see continued sales growth. With the stock trading in a bullish trend towards the bottom of the cloud, good earnings history and strong support from the 52 week low it is hard to justify anything but a long position in STX.

The options market is currently implying a move of around $2.59 or 5.1% in STX by this Friday’s close giving us targets of $48.13 and $53.31.

Trade: Buy this week’s 52-53 Vertical call spread for $0.29
Risk: $29 per lot
Reward: $71 per lot
Break Even: $52.29

Procter & Gamble Co. (PG) Preview Ahead of Earnings

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Procter & Gamble Co. (PG) provides consumer packaged goods operating in five segments under GBUs: Beauty, Grooming, Health Care, Fabric Care, Family Care, and Home Care. The stock is currently trading around $80.81 at the lower end of its 52 week range of $77.10-$93.89. The stock has been under performing the market this year falling 11.29% year to date. PG is scheduled to report earnings before the opening bell tomorrow, and the stock is up $0.58 or 0.72% on the session ahead of the close.

Over the past 12 quarters PG has rallied on earnings day 8 times with an average move of 2.64%. The stock appears slightly bullish on a chart going into the release having broken through the upside of the Ichimoku Cloud in July on the daily bars. Over the past 12 quarters PG has rallied on earnings day to expiration 8 times with an average move of 3.47%. Investors are mainly interested to see how the higher prices of products will effect sales and savings on oil-based commodity costs. With a bullish chart, great earnings history and savings with oil based products it is hard to justify anything but a long position in PG.

The options market is currently implying a move of around $1.80 or 2.2% in PG by this Friday’s close giving us targets of $79.01 and $82.61.

Trade: Buy this week’s 81.5-82.5 Vertical call spread for $0.28
Risk: $28 per lot
Reward: $72 per lot
Break Even: $81.78

Yelp Inc. (YELP) Before Earnings

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Yelp, Inc. (YELP) connects people with local businesses by bringing word of mouth online and providing a platform for business and consumers to engage and transact providing local review sites. The stock is currently trading around $33.45 at the lower end of its 52 week range of $32.36-$86.88. The stock has been under performing the market this year falling 38.79% year to date. YELP is scheduled to report earnings after the closing bell today, and the stock is down $0.24 or 0.71% on the session ahead of the close.

Over the past 12 quarters YELP has rallied on earnings day 6 times with an average move of 13.66%. The stock appears bearish on a chart going into the release having traded below or in the Ichimoku Cloud since March on the daily bars. Over the past 12 quarters YELP has rallied on earnings day to expiration 6 times with an average move of 13.18%. Investors have seen a report from Pacific Crest about the company overcharging for ads, the returns of which have been lower than expected. With a bearish chart, mixed earnings history and no positive news it is hard to justify anything but a short position on YELP.

The options market is currently implying a move of around $4.95 or 14.7% in YELP by this Friday’s close giving us targets of $28.5 and $38.40.

Trade: Buy this week’s 30.5-28.5 Vertical put spread for $0.52
Risk: $52 per lot
Reward: $148 per lot
Break Even: $29.98

A Preview for Pfizer Inc. (PFE) Earnings

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Pfizer, Inc. (PFE) is a global bio-pharmaceutical company engaged in the discovery, development and manufacture of healthcare products operating in 3 segments: Global Innovative Pharmaceutical, Global Vaccines, and Oncology and Consumer Healthcare. The stock is currently trading around $34.11 at the upper end of its 52 week range of $27.51-$35.53. The stock has been out performing the market this year rallying 9.69% year to date. PFE is scheduled to report earnings before the opening bell tomorrow, and the stock is down $0.14 or 0.42% on the session ahead of the close.

Over the past 8 quarters PFE has rallied on earnings day 4 times with an average move of 1.2%. The stock appears flat on a chart going into the release having traded within the same range of 33-35 since February on the daily bars. Investors noticed a lower EPS estimate for this quarter compared to 1Q15. This quarter the company reported an estimate lower than predicted, but Pfizer reiterated no change in its operational outlook. This revision is simply a reflection of the negative impact of foreign exchange issues, primarily the weak Euro. The company generates about 21% of its revenue from developed Europe. With a flat chart, strong resistance from 52 week high and a weak Euro it is hard to justify anything, but a short position on PFE.

The options market is currently implying a move of around $1.25 or 3.67% in PFE by this Friday’s close giving us targets of $32.86 and $35.36.

Trade: Buy this week’s 33.5-32.5 Vertical put spread for $0.25
Risk: $25 per lot
Reward: $75 per lot
Break Even: $33.25

A Look at E-Trade Financial Corp. (ETFC) Earnings

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E-Trade Financial Corp. (ETFC) is a financial services company that provides brokerage and related products and services primarily to individual retail investors and provides investor-focused banking products primarily sweet deposits to retail investors. The stock is currently trading around $29.68 at the upper end of its 52 week range of $18.20-$31.48. The stock has been out performing the market this year rallying 22.33% year to date. ETFC is scheduled to report earnings after the closing bell today, and the stock is down $0.52 or 1.71% on the session ahead of the close.

Over the past 12 quarters ETFC has rallied on earnings day 6 times with an average move of 4.40%. The stock appears bullish on a chart going into the release having traded above or in the Ichimoku Cloud since March on the daily bars. Over the past 12 quarters ETFC has rallied from earnings to the nearest options expiration 8 times with an average move of 5.19%. The stock looks as if it could reverse today’s trend and rip to the upside following the recent bullish trend. Investors have heard news of recent increase in assets under management exceeding $50 billion. With bullish technical analysis and great earnings performance in the past it is hard to justify anything, but a long position on ETFC.

The options market is currently implying a move of around $1.18 or 4.0% in ETFC by this Friday’s close giving us targets of $28.5 and $30.86.

Trade: Buy this week’s 30-31.5 Vertical Call spread for $0.32
Risk: $32 per lot
Reward: $118 per lot
Break Even: $30.32

Earnings Preview for Starbucks Corporation (SBUX)

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Starbucks Corporation (SBUX) is the premier roaster, marketer and retailer of specialty coffee in the world operating in 65 countries purchasing and roasting high-quality coffee, handcrafted coffee, tea and other beverages. The stock is currently trading around $56.65 at the upper end of its 52 week range of $35.38-$57.00. The stock has been out performing the market this year rallying 38.15% year to date. SBUX is scheduled to report earnings after the closing bell today, and the stock is down $0.5 or 0.08% on the session ahead of the close.

Over the past 12 quarters SBUX has rallied on earnings day 9 times with an average move of 4.52%. The stock appears extremely bullish on a chart going into the release having traded above the Ichimoku Cloud since March on the daily bars. Over the past 12 quarters SBUX has rallied from earnings to the nearest options expiration 9 times with an average move of 4.44%. The stock looks as if it could rip to the upside following the recent bullish trend. Investors are expecting to see positive responses from customers due to the Starbucks’ Mobile Order & Pay where a customer can order before arriving at a Starbucks store. With an extremely bullish technical analysis and spectacular earnings performance in the past it is hard to justify anything, but a long position on SBUX.

The options market is currently implying a move of around $2.5 or 4.4% in SBUX by this Friday’s close giving us targets of $54.15 and $59.15.

Trade: Buy this week’s 58.5-59.5 Vertical Call spread for $0.21
Risk: $21 per lot
Reward: $79 per lot
Break Even: $58.71

What to Expect for Celgene Corporation (CELG) on Earnings

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Celgene Corporation (CELG) is with its subsidiaries, is an integrated bio-pharmaceutical company engaged primarily in the discovery, development and commercialization of therapies for the treatment of cancer and inflammatory diseases. The stock is currently trading around $139.13 at the upper end of its 52 week range of $83.16-$140.72. The stock has been out performing the market this year rallying 24.37% year to date. CELG is scheduled to report earnings after the closing bell today, and the stock is up $0.87 or 0.63% on the session ahead of the close.

Over the past 12 quarters CELG has rallied on earnings day 7 times with an average move of 3.43%. The stock appears bullish on a chart going into the release having ripped through the bottom to the top of the Ichimoku Cloud over the past month on the daily bars. Over the past 12 quarters CELG has rallied from earnings to the nearest options expiration 7 times with an average move of 3.57%. The stock looks as if it could continue rising following the recent bullish trend. Investors are expecting to see strong revenue due to the company’s release of a new drug called Revlimid. With a bullish technical analysis and great earnings performance in the past it is hard to justify anything, but a long position on CELG.

The options market is currently implying a move of around $1.72 or 1.2% in CELG by this Friday’s close giving us targets of $137.41 and $140.85.

Trade: Buy this week’s 140-141 Vertical Call spread for $0.28
Risk: $28 per lot
Reward: $72 per lot
Break Even: $140.28