5 stocks to watch next week

Adobe and Pier 1 will report earnings, ConAgra could boost its dividend, Alcoa will be removed from the Dow Jones, and August housing starts will be announced.

By MSN Money Partner Sep 13, 2013 1:08PM

copyright CorbisMichael Fowlkes, InvestorsObserver

 

Adobe reports fiscal third-quarter results Tuesday

What's happening: Adobe (ADBE) will report its fiscal third-quarter results after the market closes on Sept. 17. Going into the company's quarterly report, analysts expect earnings of $0.34 per share, down from $0.58 during the same period last year. The stock has been a strong performer in 2013, having traded up 27.9% year to date.

 

Technical analysis: ADBE was recently trading at $48.20, just $0.43 shy of its 12-month high and $16.87 above its 12-month low. Technical indicators for ADBE are bullish and the stock is in a strong upward trend. The stock has support above $46.00. Of the 17 analysts who cover the stock 10 rate it a "strong buy," one rates it a "buy,"and six rate it a "hold." The stock receives Standard and Poor's 1 STARS "Strong Sell" ranking.

 

Analysts' thoughts: Adobe last reported earnings in June, announcing strong numbers and an upbeat forward guidance. The company showed earnings, excluding items, of $0.36 per share, topping the $0.33 analysts had forecast. Revenues were in-line with estimates at $1.01 billion. Adobe has taken advantage of the rising popularity in cloud computing with its web-based Creative Cloud, which includes the company's popular titles Photoshop, Illustrator and Flash. Creative Cloud was introduced during the second quarter of 2012, and has been gaining in popularity. During the second quarter, the company added 221,000 paid subscribers, which took the total number of subscribers to 700,000, and I expect to see more strong subscriber growth during the third quarter. The stock has been strong this year, and if the company is able to post earnings in-line or higher than analyst estimates the stock should continue to trend higher.

 

Stock-only trade: If you're looking to establish a long stock position in ADBE, consider buying the stock under $48, and sell if it falls below $43 or take profits if it gets to $54.50.

 

Option trade: If you are looking for a hedged options trade on ADBE, consider an October 41/44 bull-put credit spread for a 25-cent credit. That's a potential 9.1% return (89.7% 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 January $46 call. If ADBE rises just 5.6% 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.

 

ConAgra may announce a dividend increase

What's happening: ConAgra (CAG) could announce a higher dividend during the week. The stock is currently paying a 3.0% annual dividend yield, but that amount is likely to increase when the company announces it next dividend, which should be soon. ConAgra will also report fiscal first-quarter earnings before the market opens on Sept. 19. Analysts expect the company to report earnings of $0.45 per share, versus $0.44 during the same period last year. The stock has traded up 10.5% year to date.

 

Technical analysis: CAG was recently trading at $31.89, down $5.39 from its 12-month high and just $6.39 above its 12-month low. Technical indicators for CAG are bearish and the stock is in a strong downward trend. The stock has support above $30. Of the 11 analysts who cover the stock six rate it a "strong buy," one rates it a "buy," and four rate it a "hold." The stock receives Standard and Poor's 5 STARS "Strong Buy" ranking.

 

Analysts' thoughts: ConAgra has boosted its quarterly dividend each of the last four years, and I expect that streak to be extended this week when it announces its next dividend payment. Each of the last four years, the higher dividend was announced during the third week of September, so it is likely that the news will be announced on the 19th when it reports its second quarter earnings figures. The last two years, the company has increased its quarterly payment by slightly over 4%, and I expect the same this year. Its current quarterly dividend is $0.25 per share, and I expect it to lift that payment to $0.26, which would mark a 4.0% increase. Traders that track dividend-paying stocks will be paying attention to ConAgra, and the stock is likely to trade higher leading up to the 19th in anticipation of an increase.

 

Stock-only trade: If you're looking to establish a long stock position in CAG, consider buying the stock under $31.50, and sell if it falls below $29.50 or take profits if it gets to $36.

 

Option trade: If you are looking for a hedged options trade on CAG, consider an October 27/30 bull-put credit spread for a 20-cent credit. That's a potential 7.1% return (70.5% annualized*) and the stock would have to fall 5.3% to cause a problem.

 

Speculative call-only trade: For those with an appetite for higher risk and bigger returns, consider buying the December $30 call. If CAG rises just 3.1% 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.

 

Alcoa gets dropped from the Dow Jones Index

What's happening: After being included among the 30 stocks in the Dow Jones for the last 54 years, Alcoa (AA) will be dropped from the index, effective as of the close of trading on Sept. 20. The decision to remove Alcoa from the index is partly due to its poor stock performance over the last two years. Alcoa has been the worst-performing stock in the Dow Jones this year, having lost 4.7% year to date.  

 

Technical analysis: AA was recently trading at $8.19, down $1.74 from its 12-month high and $0.56 above its 12-month low. Technical indicators for AA are neutral and the stock is in a weak upward trend. The stock has resistance under $8.50 and support above $7.80. Of the 14 analysts who cover the stock two rate it a "strong buy," two rate it a "buy," six rate it a "hold," one rates it a "sell," and three rate it a "strong sell." The stock receives Standard and Poor's 3 STARS "Hold" ranking.

 

Analysts' thoughts: On the initial news that Alcoa was being removed from the Dow Jones, the stock did not run into selling pressure, and in fact has actually moved higher following the announcement. However, this could change once the stock is actually dropped from the index on Sept. 20. While I do not believe that being delisted from the 30 Dow Jones stocks will have a long-term impact on the stock, I do expect an initial drop in price once exchange traded funds and index mutual funds that are tied to the Dow are forced to liquidate their Alcoa holdings. Once this liquidation takes place, the stock will trade lower and this could have a ripple effect as traders may join in on the selling.

 

Stock-only trade: With an expected drop in the stock, I would not suggest setting up any stock only trade at the current time.

 

Option trade: If you are looking for a hedged options trade on AA, consider a November 9/11 bear-call credit spread for a 15-cent credit. That's a potential 8.1% return (45.5% annualized*) and the stock would have to rise 12.8% to cause a problem.

 

Speculative put-only trade: For those with an appetite for higher risk and bigger returns, consider buying the November $10 put. If AA falls just 4.8% 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.

 

August housing starts data scheduled for release Wednesday

What's happening: The Commerce Department will release data on housing starts for the month of August on Sept. 18. The real estate market has been showing signs of improvement, but PulteGroup (PHM) has not managed to make real gains. The stock has been a major underperformer this year, having traded down 8.4% year to date.

 

Technical analysis: PHM was recently trading at $16.59, down $7.88 from its 12-month high and $2.36 above its 12-month low. Technical indicators for PHM are bearish and the stock is showing signs of a possible trend reversal. The stock has support above $15.25 and resistance below $19. Of the 13 analysts who cover the stock five rate it a "strong buy," and eight rate it a "hold." The stock receives Standard and Poor's 2 STARS "Sell" ranking.

 

Analysts' thoughts: Despite the ongoing recovery of the housing market, there are still valid concerns over whether or not the recovery can continue into next year. The Federal Reserve has hinted that it is prepared to taper back on its monetary easing policy, which will in turn result in rising interest rates. Interest rates have already started to inch higher, and if rates really start to move higher there is a real risk to the housing market. PulteGroup appears to have found support and has been making back some of its recent losses, and a strong reading on August housing starts could be exactly the catalyst that PHM needs to continue trading higher through the remainder of the year.

 

Stock-only trade: If you're looking to establish a long stock position in PHM, consider buying the stock under $17, and sell if it falls below $15.50 or take profits if it gets to $19.50.

 

Option trade: If you are looking for a hedged options trade on PHM, consider an October 12/15 bull-put credit spread for a 25-cent credit. That's a potential 9.1% return (89.7% annualized*) and the stock would have to fall 9.2% to cause a problem.

 

Speculative call-only trade: For those with an appetite for higher risk and bigger returns, consider buying the January $14 call. If PHM rises just 6.9% 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.

 

Pier 1 to report second-quarter results Thursday

What's happening: Specialty retailer Pier 1 (PIR) will report its second-quarter results before the market opens on Sept. 19. Going into the company's quarterly report, analysts expect earnings of $0.21 per share, up from $0.19 during the same period last year. The stock has been a decent performer this year, having traded up 14.1% year to date.

 

Technical analysis: PIR was recently trading at $22.66, down $2.63 from its 12-month high and $4.61 above its 12-month low. Technical indicators for PIR are neutral and the stock is in a weak upward trend. The stock has support above $21.80 and resistance below $24. Of the 11 analysts who cover the stock nine rate it a "strong buy," one rates it a "buy," and one rates it a "hold." The stock receives Standard and Poor's 3 STARS "Hold" ranking.

 

Analysts' thoughts: Pier 1 most recently reported earnings in June, with generally upbeat numbers. Its first quarter sales were up 9.3%, and same-store sales increased by 5.9%, with earnings up 14% from the same period last year. The economic recovery has helped boost consumer confidence and spending, and I expect another strong quarter from Pier 1. The company was close to bankruptcy during the recession in 2009, but has come back extremely strong, and I expect the improved housing market to keep the company growing nicely in the near future.


Following the last earnings report the stock ran into selling pressure, but that was mostly a result of weakness in the overall market. I expect to see solid numbers, and believe the stock will trade higher following the report.

 

Stock-only trade: If you're looking to establish a long stock position in PIR, consider buying the stock under $22.50, and sell if it falls below $21.75 or take profits if it gets to $25.50.

 

Option trade: If you are looking for a hedged options trade on PIR, consider a December 17/20 bull-put credit spread for a 30-cent credit. That's a potential 11.1% return (40.6% annualized*) and the stock would have to fall 9.8% to cause a problem.

 

Speculative call-only trade: For those with an appetite for higher risk and bigger returns, consider buying the December $21 call. If PIR rises just 5.6% 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

 

Get InvestorsObserver's free report 18 Warning Signs to Know When to Dump a Stock

 

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

 

1Comment
Sep 13, 2013 2:07PM
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I'd be more inclined to what the FED, gold, Syria and the idiots in Washington and maybe Putin.
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