5 stocks to watch for next week

Wal-Mart, Nordstrom, and Kohl's report earnings. E-commerce sales figures to be released. Boeing's Dreamliner is cleared to fly.

By MSN Money Partner May 10, 2013 11:10AM

Stock market © Digital Vision SuperStockBy Michael Fowlkes, InvestorsObserver


Wal-Mart reports earnings Wednesday
What's happening: Wal-Mart
(WMT) will be reporting its first quarter results before the market opens on May 15. Analysts expect the retailer to report earnings of $1.15 per share, up from $1.09 during the same period last year. Wal-Mart has posted better than expected earnings in each of the last four quarters, and will look to extend that streak. Wal-Mart stock has been strong thus far in 2013, up 17.1% year-to-date.


Technical analysis: WMT was recently trading at $78.25, down $1.25 from its 12-month high and $19.44 above its 12-month low. Technical indicators for WMT are bullish and the stock is showing signs of a possible trend reversal. The stock has support above under $77.25. Of the 21 analysts who cover the stock 11 rate it a "strong buy," and ten rate it a "hold." The stock receives Standard & Poor's 3 STARS "Hold" ranking.


Analyst's thoughts: An improving economy, rebounding housing market, and lower unemployment has resulted in higher confidence, something that has benefited the retail industry. With the improving consumer confidence, there is little reason to believe we will see any weakness in Wal-Mart's quarterly report. The company has a solid history of strong earnings reports, having only missed analyst estimates twice in the last four years. I expect to see more strength from Wal-Mart through the remainder of the year, and with a price-to-earnings ratio of just 15.6 there is still value left in the stock.


Stock-only trade: If you're looking to establish a long stock position in WMT, consider buying the stock when it is below $78 and sell if it falls below $69.50 or take profits if it gets to $90.


Option trade: If you are looking for a hedged options trade on WMT, consider a July 70/72.50 bull-put credit spread for a 20-cent credit. That's a potential 8.7% return (44.1% annualized*) and the stock would have to fall 7.1% to cause a problem.


Speculative call-only trade: For those with an appetite for higher risk and bigger returns, consider buying the December $75 call. If WMT 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.



Boeing's Dreamliner problems coming to an end
What's happening:
After a series of mishaps with the batteries in Boeing's (BA) new Dreamliner 787, the company was forced to ground the jet while investigators figured out what was causing the problems. After a lengthy investigation, the jet is once again starting to fly, and United (UAL) announced that it would resume flights of the Dreamliner on May 20. Despite the uncertainty surrounding the Dreamliner, Boeing has remained strong, with the stock trading up 27% year-to-date.


Technical analysis: BA was recently trading at $94.04, down $1.00 from its 12-month high and $27.22 above its 12-month low. Technical indicators for BA are bullish and the stock is in a strong upward trend. The stock has support above $85.00. Of the 21 analysts who cover the stock 16 rate it a "strong buy," one rates it a "buy," three rate it a "hold," and one rates it a "strong sell." The stock receives Standard & Poor's 4 STARS "Buy" ranking.


Analyst's thoughts: The fact that investors remained so bullish on Boeing despite the Dreamliner mishap says much about this solid company. It recently posted first quarter earnings of $1.73 per share, easily topping the $1.49 that analysts had forecast. Its quarterly revenue was down, but that was only because it delivered just one 787 during the quarter, compared with five deliveries the year before. Now that the 787 has been cleared to fly I expect deliveries to pick up and the company's revenue back on track.


Stock-only trade: With BA trading at a five-year high we would not want to set up a stock only trade at the current time. We will wait and see if we see any profit taking in the stock before setting up a stock-only trade on BA.


Option trade: If you are looking for a hedged options trade on BA, consider a June 85/87.50 bull-put credit spread for a 30-cent credit. That's a potential 13.6% return (113.1% annualized*) and the stock would have to fall 6.6% to cause a problem.


Speculative call-only trade: For those with an appetite for higher risk and bigger returns, consider buying the November $90 call. If BA 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.



E-commerce sales figures coming out Wednesday
What's happening:
On May 15, first quarter e-commerce sales figures are due out. These figures are important for all retailers. Whether a company's business is solely online, such as eBay (EBAY), or a mix of brick and mortar sales and Internet sales, such as Wal-Mart, it is important to see e-commerce sales. EBay has had a volatile year, with some big gains and losses. The stock has recently shown strength following a better than expected first quarter report, and is currently up 7.9% year to date.


Technical analysis: EBAY was recently trading at $54.96, down $3.08 from its 12-month high and $16.96 above its 12-month low. Technical indicators for EBAY are bearish and the stock is showing signs of a possible trend reversal. The stock has support above $50.00 and resistance under $56.75. Of the 28 analysts who cover the stock 20 rate it a "strong buy," four rate it a "buy," and four rate it a "hold." The stock receives Standard & Poor's 3 STARS "Hold" ranking.


Analyst's thoughts: The entire e-commerce sector will move in reaction to the sales figures, but eBay likely has little downside to it. The company has already posted its first quarter earnings, which came in above analyst estimates and sent the stock trading higher. However, there is still much volatility in the stock, so there is the danger that a disappointing e-commerce report could stall its current move to the upside. If the report is disappointing and eBay are lower as a result, I would use the pullback as a buying opportunity. The stock is currently trading with a price-to-earnings ratio of 26, so a slight pullback could create a great buying opportunity for investors.


Stock-only trade: If you're looking to establish a long stock position in EBAY, consider buying the stock under $55, and sell if it falls below $50 or take profits if it gets to $60.


Option trade: If you are looking for a hedged options trade on EBAY, consider a July 44/49 bull-put credit spread for a 50-cent credit. That's a potential 11.1% return (56.3% annualized*) and the stock would have to fall 9.9% 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 EBAY rises just 6.3% 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.



Nordstrom to ring 1Q results Thursday

What's happening: Retailer Nordstrom (JWN) will report its first quarter results after the market closes on May 16. Analysts have forecast the company to report earnings of $0.76 a share, up from $0.70 a share during the same period last year. The stock has been strong thus far in 2013, gaining 11% year to date, and currently trading just a penny under its 52-week high.


Technical analysis: JWN was recently trading at $59.00, just a penny below its 12-month high and $12.73 above its 12-month low. Technical indicators for JWN are bullish and the stock is in a weak upward trend. The stock has support above $55.00. Of the 21 analysts who cover the stock seven rate it a "strong buy," three rate it a "buy," nine rate it a "hold," one rates it a "sell" and one rates it a "strong sell." The stock receives Standard & Poor's 4 STARS "Buy" ranking.


Analyst's thoughts: Nordstrom has been strong on the back of improved consumer confidence, which is expected to remain positive for the remainder of the year. The overall economy continues to improve, and this is helping all retailers, in particular high-end ones such as Nordstrom. The company posted better than expected numbers for its fourth quarter, but has missed twice over the last year. With consumer confidence on the rise, I am bullish on the stock, but would want to see a pullback before setting up a new position since it is trading just shy of its 52-week high. Despite its recent strength, the stock is still trading with a price-to-earnings ratio of just 16.3, so there is value, and a little pullback in the stock would create a great buying opportunity.


Stock-only trade: While we like the stock, we would not want to set up a new trade at the current time simply because it is currently sitting just a penny under its 52-week high.


Option trade: If you are looking for a hedged options trade on JWN, consider a July 50/52.50 bull-put credit spread for a 25-cent credit. That's a potential 11.1% return (56.3% annualized*) and the stock would have to fall 10% to cause a problem.


Speculative call-only trade: For those with an appetite for higher risk and bigger returns, consider buying the July $52.50 call. If AU rises just 7.7% 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.



Kohl's earnings uncovered Thursday
What's happening: Kohl's
(KSS) is scheduled to report its first quarter results before the market opens on May 16, with analysts expecting earnings of $0.59 a share, slightly lower than the $0.63 per share that the company earned during the same period last year. Kohl's has posted better than expected earnings each of the last six quarters. The stock has traded up 11.2% year-to-date.


Technical analysis: KSS was recently trading at $47.00, $8.25 below its 12-month high and $5.65 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 $46.00 and resistance under $48.25. 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: After a steep sell off at the end of last year, the stock has managed to claw back some of its losses but has been in a sideways pattern for the last two months. The stock will likely remain in a sideways pattern, but with more upside potential than downside. With consumer confidence on the rise all retailers should benefit, and Kohl's is no exception. Kohl's really excels when the economy turns negative and consumers look for more bargain purchases. While the economy is improving, it remains very fragile, and it would not take much to see weakness in the months ahead. Wells Fargo recently initiated coverage on the stock with a "market perform" rating, and I tend to agree with this assessment of the stock.


Stock-only trade: If you're looking to establish a long stock position in KSS, consider buying the stock when it is below $47.00 and sell if it falls below $43.40 or take profits if it gets to $54.00.


Option trade: If you are looking for a hedged options trade on KSS, consider a June 40/43 bull-put credit spread for a 35-cent credit. That's a potential 13.2% return (109.6% 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 October $45 call. If KSS rises just 5.4% 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 owns stock in Wal-Mart (WMT), and does not have direct ownership in any of the other stocks mentioned.

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