Will commodities deliver the goods?

From potash to petroleum and seeds to steel, traders have plenty to choose from as earnings season nears.

By Stock Traders Daily Jan 2, 2013 12:46PM

Combines in field copyright Mark Karrass, Corbis, CorbisBy Billy Fisher, Stock Traders Daily


The unofficial start to earnings season is only days away and there are a number of players in commodities that will soon be announcing quarterly results. There will be plenty of options for traders looking to make some money but, in some cases, more attractive buying opportunities may arise subsequent to the releases. Here are four commodity plays ahead of earnings.


Seeds of change

On Friday, potash producer Mosaic (MOS) will check in with the results of its fiscal Q2. Analysts are predicting that the company will post revenue of $2.54 billion versus $3 billion in the prior year. The stock finished 2012 strong with a 2.6% gain on Monday.


Company management attempted to temper expectations in November as it noted delays in distributors signing long-term supply contracts. With the 50-day moving average of this stock still sitting below the 200-day moving average, traders may be best served by waiting to see if the earnings announcement will be enough to spur a moving average crossover. Otherwise the stock could be poised for a breather.


Before the market open on Tuesday, Monsanto Company (MON) is slated to announce its fiscal Q1 earnings. The consensus among analysts is that the company will report a 60.9% rise in EPS on an 8.2% increase in total revenue when compared to the prior year quarter. The tape looks great on the stock, but a Q4 miss on EPS should keep traders on the sidelines for now since a buying opportunity could presents itself in the form of a repeat occurrence.


High-octane returns

On Monday, the refining giant Phillips 66 (PSX) will announce its Q4 results. The consensus on Wall Street is that the company will report EPS of $1.66 on revenue of $43.4 billion.


Even with a 5.0% run-up on Monday, I am still bullish on this name heading into the release. It has soundly topped estimates in each of its last two quarters and there has been little to stand in the way of the stock after it consistently trended higher in 2012 en route to a 62.1% return.


One other commodity play for traders to watch in the coming days is Commercial Metals Company (CMC). On Monday, the company is set to announce its fiscal Q1 earnings. Analysts are calling for the company to announce a 20.0% decline in EPS and a 5.0% slide in total revenue. This is still a safe bet ahead of the earnings announcement. Expectations for the steel market have been pessimistic and CMC's stock price did not suffer when it missed EPS expectations in each of its last two quarters.  


Specific Trading Strategies for the companies mentioned in this article are available at Stock Traders Daily.




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