4 stocks to watch next week

Toyota enjoys strong August sales. August retail sales numbers are to be announced and Kroger, and Men's Wearhouse to report earnings.

By MSN Money Partner Sep 6, 2013 11:32AM

Trading floor (© Image Source/SuperStock)By Michael Fowlkes, InvestorsObserver


Toyota reports big jump in August U.S. sales

What's happening: Japanese automaker Toyota (TM) recently reported strong August sales figures. The company sold 230,000 vehicles in the U.S., which is the most vehicles sold during a single month in more than five years. After posting steady gains during the first half of the year, the stock has been trading in a sideways pattern since the start of July but remains up 34.9% year to date.


Technical analysis: TM was recently trading at $125.84, down $9.10 from its 12-month high and $51.57 above its 12-month low. Technical indicators for TM are bullish and the stock is in a weak downward trend. The stock has support above $120.00 and resistance below $130.00. The stock receives Standard & Poor's 4 STARS "Buy" ranking.


Analyst's thoughts: Following the strong August sales numbers, which were up 20% from the same period last year, I expect Toyota stock to trade strongly through the remainder of the year. Toyota also raised its full year guidance of U.S. sales for its Toyota, Lexus and Scion brands by around 50,000 units. For the second month in a row, Toyota outsold Ford (F) in the U.S. I expect the auto industry to remain strong through the latter part of the year, and believe Toyota stock will add to its already impressive 2013 gains.


Stock-only trade: If you're looking to establish a long stock position in TM, consider buying the stock under $125, and sell if it falls below $115 or take profits if it gets to $140.


Option trade: If you are looking for a hedged options trade on TM, consider an October 110/115 bull-put credit spread for a 60-cent credit. That's a potential 13.6% return (113.1% annualized*) and the stock would have to fall 7.8% to cause a problem.


Speculative call-only trade: For those with an appetite for higher risk and bigger returns, consider buying the January $120 call. If TM rises just 5.9% you can pull in a 20% or better profit on the option. However, if the stock moves lower, this kind of trade could lose a significant amount.



Kroger reports earnings Thursday

What's happening: Grocery chain Kroger (KR) will be reporting second quarter results before the market opens September 12. For the quarter, analysts expect earnings of $0.59 per share, up from $0.51 during the same period last year. After a very strong first half of the year, Kroger stock ran into some selling pressure through August, but appears to have found support and has begun to move in the right direction. Even with the August sell-off, the stock is up 45.5% year to date.


Technical analysis: KR was recently trading at $37.34, down $2.64 from its 12-month high and just $15.08 above its 12-month low. Technical indicators for KR are neutral and the stock is in a weak upward trend. The stock has support above $36.50. Of the 10 analysts who cover the stock five rate it a "strong buy," one rates it a "buy," and four rate it a "hold." The stock receives Standard & Poor's 3 STARS "Hold" ranking.


Analyst's thoughts: I expect to see positive numbers from Kroger for its second quarter. It had a good first quarter, during which it earned $0.92 per share, well ahead of the $0.88 per share analysts were expecting. It slightly missed its revenue forecast, but only by 0.53%. Following its first quarter, the company noted that its Customer 1st strategy was working, and thus it raised its full-year guidance to a range of $2.73 to $2.80 per share from its previous forecast of $2.71 to $2.79 per share. The stock traded higher in the six weeks after its last earnings report but has run into some selling pressure over the last month. I expect to see another strong quarterly report, which should help the stock make back some of its recent losses.


Stock-only trade: If you're looking to establish a long stock position in KR, consider buying the stock under $37, and sell if it falls below $34 or take profits if it gets to $42.


Option trade: If you are looking for a hedged options trade on KR, consider an October 32/35 bull-put credit spread for a 30-cent credit. That's a potential 11.1% return (92.2% annualized*) and the stock would have to fall 5.4% to cause a problem.


Speculative call-only trade: For those with an appetite for higher risk and bigger returns, consider buying the December $35 call. If KR rises just 2.9% you can pull in a 20% or better profit on the option. However, if the stock moves lower, this kind of trade could lose a significant amount.



August retail figures to be released Friday

What's happening: On September 13, the market will get a better picture of the retail sector when the U.S. Census Bureau releases August retail sales data. Sears Holding (SHLD) is in the midst of a turnaround program, but so far changes have not had the desired effect. The stock is up 9.1% year to date, but that trails the overall market and is sharply lower than it was just a few months ago.  


Technical analysis: SHLD was recently trading at $46.96, down $21.81 from its 12-month high and $8.56 above its 12-month low. Technical indicators for SHLD are neutral and the stock is in a strong upward trend. The stock has support above $41.75. The one analyst who covers the stock rates it "hold." The stock receives Standard & Poor's 3 STARS "Hold" ranking.


Analyst's thoughts: I expect to see good August retail sales. Consumer confidence was down in the month versus July, but it gradually improved by the end of the month, and consumers were more upbeat on the future of the economy. Sears has been rallying over the last two weeks but is still 31.7% below its 52-week high. A solid reading on August sales could help the stock continue to build on its recent gains, but it will not be enough to push it back to its 52-week high. During its most recent quarter, same-store sales were down 1.5% from the same period last year, and the company lost $1.46 per share. That compares to a loss of $1.25 during the same period last year. A solid reading on August retail sales will give SHLD a much needed boost, but will probably not push the stock too much higher.


Stock-only trade: If you're looking to establish a long stock position in SHLD, consider buying the stock under $46.50, and sell if it falls below $42 or take profits if it gets to $53.


Option trade: If you are looking for a hedged options trade on SHLD, consider an October 34/39 bull-put credit spread for a 45-cent credit. That's a potential 9.9% return (82.0% annualized*) and the stock would have to fall 16.0% to cause a problem.


Speculative call-only trade: For those with an appetite for higher risk and bigger returns, consider buying the October $45 call. If SHLD rises just 2.7% you can pull in a 20% or better profit on the option. However, if the stock moves lower, this kind of trade could lose a significant amount.



Men's Wearhouse unveils Q2 results Wednesday

What's happening: Retailer Men's Wearhouse (MW) will be reporting its second quarter results after the market closes on September 11. Aanalysts expect earnings of $1.23 per share, up from $1.15 during the same period last year. The stock has been a strong performer this year, gaining 23.7% year to date.


Technical analysis: MW was recently trading at $38.16, down $2.87 from its 12-month high and $10.74 above its 12-month low. Technical indicators for MW are neutral and the stock is in a weak downward trend. The stock has support above $37.50 and resistance below $39.50. Of the six analysts who cover the stock four rate it a "strong buy," and two rate it a "hold." The stock receives Standard & Poor's 3 STARS "Hold" ranking.


Analyst's thoughts: Men's Wearhouse's upcoming earnings report will be the first one without founder George Zimmer at the helm. Zimmer built the company from one store into the nation's largest men's boutique clothing retailer. His resignation came a week after the company reported a 23% jump in first quarter earnings and a 5% jump in sales. The company improved its gross margin during the quarter to 45.0% from 43.3% during the same period last year. The company reaffirmed its full year guidance, and I believe that second quarter earnings will fall in line, or possibly a few pennies above analyst estimates.


Stock-only trade: If you're looking to establish a long stock position in MW, consider buying the stock under $38, and sell if it falls below $35.50 or take profits if it gets to $43.50.


Option trade: If you are looking for a hedged options trade on MW, consider an October 30/34 bull-put credit spread for a 50-cent credit. That's a potential 14.3% return (118.5% annualized*) and the stock would have to fall 9.5% to cause a problem.


Speculative call-only trade: For those with an appetite for higher risk and bigger returns, consider buying the November $35 call. If MW rises just 5.3% you can pull in a 20% or better profit on the option. However, if the stock moves lower, this kind of trade could lose a significant amount.



*Annualized returns provided for comparison purposes only


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At the time of writing, Mr. Fowlkes does not have direct ownership in any of the other stocks mentioned.

1Comment
Sep 6, 2013 11:57AM
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I'm going to be watching Intel's Developer Forum for news about their new Atom Bay Trail SoC's for desktops, notebooks, smart phones, tablets and industrial uses. You're appliances will soon say Intel Atom Inside and talk to your Wifi network.
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