5 stocks to watch next week

Time Warner, Priceline.com and Archer Daniels report earnings. William Ackman takes a big position in Air Products. July chain store sales figures are due.

By MSN Money Partner Aug 2, 2013 11:03AM

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


Time Warner reports earnings Wednesday

What's happening: Time Warner (TWX) will report its second quarter results on August 7. Analysts are expecting earnings of $0.76 a share, up from $0.59 a share during the same period last year. The stock has been strong in 2013, gaining 31.5% year-to-date.


Technical analysis: TWX was recently trading at $62.26, just $0.79 below its 12-month high and $24.30 above its 12-month low. Technical indicators for TWX are bullish and the stock is in a weak upward trend. The stock has support above $60.50. Of the 25 analysts who cover the stock 16 rate it a "strong buy," two rate it a "buy," and seven rate it a "hold." The stock receives Standard & Poor's 4 STARS "Buy" ranking.


Analyst's thoughts:

TWX has outpaced analyst estimates during each of the last 15 quarters, and I see little reason to expect this trend to break when it reports its second quarter results. The company operates an impressive portfolio of media outlets, including HBO, CNN and Turner Broadcasting System. While Time Warner's television and movie segments have been strong, it has experienced weakness in its print magazines, in particular Time Magazine. It has announced plans to spin off Time Inc. by the end of the year, and we may hear more information on the timing of that spinoff during the conference call. Its movie studio revenue is expected to rise, mainly on the back of its summer blockbuster "Man of Steel" which debuted in mid-June. I expect another strong quarter for TWX, which should result in ongoing stock strength.

Stock-only trade: If you're looking to establish a long stock position in TWX, consider buying the stock under $63, and sell if it falls below $57 or take profits if it gets to $72.50.


Option trade: If you are looking for a hedged options trade on TWX, consider a September 52.50/57.50 bull-put credit spread for a 45-cent credit. That's a potential 9.9% return (70.8% annualized*) and the stock would have to fall 8.2% to cause a problem.


Speculative call-only trade: For those with an appetite for higher risk and bigger returns, consider buying the October $60 call. If TWX rises just 2.1% 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.



Priceline.com unveils 2Q results Thursday

What's happening: Online travel booking site Priceline.com (PCLN) will be reporting its second quarter results on August 8. Analysts expect the company to report earnings of $9.30 per share, up from $7.85 per share during the same period last year. The stock has been a strong performer so far in 2013, up 41.1% year-to-date.


Technical analysis: PCLN was recently trading at $891.01, down $35.39 below its 12-month high and $337.59 above its 12-month low. Technical indicators for PCLN are bullish and the stock is showing signs of a possible trend reversal. The stock has support above $840.00. Of the 17 analysts who cover the stock 15 rate it a "strong buy," and two rate it a "buy." The stock receives Standard & Poor's 3 STARS "Hold" ranking.


Analyst's thoughts: An improved economy has been good for the travel industry, and there is little reason to believe this will not it won't show in Priceline's second quarter. The company has a strong earnings track record, having outpaced analyst estimates during each of its last 28 quarters. I expect another strong quarter, and believe the stock will continue to be strong through the remainder of the year.


Stock-only trade: If you're looking to establish a long stock position in PCLN, consider buying the stock under $891, and sell if it falls below $800 or take profits if it gets to $975.


Option trade: If you are looking for a hedged options trade on PCLN, consider an August 800/805 bull-put credit spread for a 45-cent credit. That's a potential 9.9% return (212.3% annualized*) and the stock would have to fall 9.6% to cause a problem.


Speculative call-only trade: For those with an appetite for higher risk and bigger returns, consider buying the October $870 call. If PCLN rises just 5.0% 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.



Archer Daniels unveils 2Q earnings Tuesday

What's happening: Farm products manufacturer Archer-Daniels-Midland (ADM) will report its second quarter results on August 6. Analysts have forecast earnings per share of $0.45, which is up from $0.38 per share during the same period last year. The stock has been a strong performer in 2013, up 34.7% year-to-date.


Technical analysis: ADM was recently trading at $36.47, down $0.38 from its 12-month high and $12.09 above its 12-month low. Technical indicators for ADM are bullish and the stock is in a weak upward trend. The stock has support above $34. Of the 10 analysts who cover the stock one rates it a "strong buy," two rate it a "buy, five rate it a "hold," and two rate it a "hold." The stock receives Standard & Poor's 3 STARS "Hold" ranking.


Analyst's thoughts: I believe there is reason to be cautious over ADM's upcoming earnings report. The company's main competitor, Bunge (BG), recently announced disappointing quarterly results, its earnings hit hard by tight crop supplies. Revenues were lighter than expected, and earnings were sharply lower than analyst estimates. In May, ADM warned it, too, would struggle with volume until the autumn U.S. harvests, so it would not be surprising to see a revenue miss, with earnings well under what they were in the same period last year. With ADM up so much this year, an earnings disappointment could send shares sharply lower.


Stock-only trade: If you're looking to establish a long stock position in ADM, consider buying the stock under $36.50, but given the potential for an earnings miss, keep a close eye on the stock, and be ready to sell if the stock drops under $34 or take profits if it gets to $41.50.


Option trade: If you are looking for a hedged options trade on ADM, consider a September 41/43 bear-call credit spread for a 20-cent credit. That's a potential 11.1% return (79.5% annualized*) and the stock would have to rise 10.8% to cause a problem.


Speculative put-only trade: For those with an appetite for higher risk and bigger returns, consider buying the December $39 put. If ADM falls just 6.4% you can pull in a 20% or better profit on the option. However, if the stock moves higher, this kind of trade could lose a significant amount.



Air Products jumps on news of Ackman stake

What's happening: Last month, activist investor William Ackman announced plans to invest upwards of $2 billion in a U.S. company, leading to wide speculation as to which company he would choose. Ackman has now officially announced a 9.8% stake in Air Products (APD). Following the announcement, shares of APD rose 2.8%, and are currently up 31.3% year-to-date.


Technical analysis: APD was recently trading at $108.64, down $1.34 from its 12-month high and $31.86 above its 12-month low. Technical indicators for APD are bullish and the stock is showing signs of a possible trend reversal. The stock has support above $95.00. Of the 18 analysts who cover the stock six rate it a "strong buy," one rates it a "buy," 10 rate it a "hold," and one rates it a "sell." The stock receives Standard & Poor's 3 STARS "Hold" ranking.


Analyst's thoughts: If history is any indication, Ackman will start to quietly work his influence on the company. His first move, and one that he has already made at Air Products, is to request a meeting with management. His next move will most likely be to request some seats on the board, where he believes he can enact the most change. Whether or not the relationship remains friendly depends on how receptive the company is to Ackman's demands. If things go smoothly, the stock should continue recent strength. However, if things start to get nasty, the stock could run into pressure in the months ahead.


Stock-only trade: If you're looking to establish a long stock position in APD, consider buying the stock under $108, and sell if it falls below $97 or take profits if it gets to $121.


Option trade: If you are looking for a hedged options trade on APD, consider a September 95/100 bull-put credit spread for a 50-cent credit. That's a potential 11.1% return (79.5% annualized*) and the stock would have to fall 7.2% to cause a problem.


Speculative call-only trade: For those with an appetite for higher risk and bigger returns, consider buying the December $100 call. If APD rises just 5.1% 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.



Kohl's reports July chain store sales

What's happening: Retailer Kohl's (KSS) has been a strong performer this year. An improved economy has resulted in optimism in the retail sector. On August 8 we will see just how the retail sector is doing when we get a reading on July chain store sales. Kohl's has been trending higher since the start of the year and is currently up 25.0% year-to-date.


Technical analysis: KSS was recently trading at $52.98, down $2.27 from its 12-month high and $11.63 above its 12-month low. Technical indicators for KSS are bullish and the stock is showing signs of a possible trend reversal. The stock has support above $50.00 and resistance below $54.00. Of the 19 analysts who cover the stock eight rate it a "strong buy," eight rate it a "hold," and three rate it a "strong sell." The stock receives Standard & Poor's 2 STARS "Sell" ranking.


Analyst's thoughts: Consumer confidence fell slightly in July, but even with the small pullback, confidence remains high. The Conference Board consumer confidence index dropped to 80.3 in July, down from 82.1 in June, which is a slight reason for concern, but it remains well above its level this time last year. Even with the slight decline in consumer confidence in July, I expect a strong reading of July retail chain sales, and ongoing strength for Kohl's.


Stock-only trade: If you're looking to establish a long stock position in KSS, consider buying the stock under $54, and sell if it falls below $50 or take profits if it gets to $62.


Option trade: If you are looking for a hedged options trade on KSS, consider a September 45/50 bull-put credit spread for a 40-cent credit. That's a potential 8.7% return (62.2% annualized*) and the stock would have to fall 6.5% to cause a problem.


Speculative call-only trade: For those with an appetite for higher risk and bigger returns, consider buying the October $50 call. If KSS rises just 2.6% 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.

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