Market Overview

Stocks to Watch for the Week of March 11, 2013

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Michael Fowlkes, InvestorsObserver

 

Costco reports fiscal second quarter results March 11

What's happening with COST: Bulk retailer Costco (NASDAQ: COST) has been trading in a slow upwards trend since the third quarter of 2012. The company has posted better than expected for each of its last four quarters, and will get a chance to extend its streak when it reports its fiscal second quarter earnings on March 11. Analysts expect the company to show fiscal Q2 earnings of $1.06 per share, up from $0.90 during the same period last year.

 

Technical analysis: COST was recently trading at $102.56, down $3.41 from its 12-month high and $20.58 above its 12-month low. Technical indicators for COST are bearish and the stock is showing signs of a possible trend reversal. The stock has recently seen support above $101. Of the 21 analysts who cover the stock 11 rate it a "strong buy", one rates it a "buy", seven rate it a "hold" and two rate it a "strong sell". The stock receives Standard and Poor's 3 STARS "Hold" ranking.

 

Analysts' thoughts: Costco recently reported that its revenues climbed by 6% in February, and that same store sales were up 6% in the U.S. and 4% at its international locations. It also reported that its second quarter sales were up 8%, at $24.34 billion, but coming in under the $25.13 billion that analysts were expecting. The weaker than expected sales figure could result in a disappointing earnings number, but after the preview of Q2 sales, some bad news could already be priced in.

 

Stock-only trade: If you're looking to establish a long stock position in COST, consider buying the stock when it is below $103 and sell if it falls below $92.75 or dips more than 10% or take profits if it gets to $118.50.

 

Option trade: If you are looking for a hedged options trade on COST, consider an April 93/98 bull-put credit spread for a 45-cent credit. That's a potential 9.9% return (42% annualized*) and the stock would have to fall 4.9% to cause a problem.

 

Speculative call-only trade: For those of you with an appetite for higher risk and bigger returns, consider buying the October $100 call. If COST rises just 4.6% 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.

                                               

February retail sales figures due March 13

What's happening with KSS: Shares of retailer Kohl's (NYSE: KSS) have gotten off to a strong start in 2013, after the stock took a beating during the last two months of 2012. KSS has remained strong on the back of its recent fourth quarter earnings report, in which it was able to outpace analyst estimates. On March 13, the Department of Commerce will release February retail sales figures, which analysts will watch closely. Consumer confidence has been rising, but early February retail numbers have been less than impressive.

 

Technical analysis: KSS was recently trading at $46.27, down $8.98 from its 12-month high and $4.92 above its 12-month low. Technical indicators for KSS are bullish and the stock is in a strong upward trend. The stock has recently seen support above $45.50 and resistance below $46.75. Of the 17 analysts who cover the stock seven rate it a "strong buy", six rate it a "hold", and one rates it a "strong sell". The stock receives Standard and Poor's 2 STARS "Sell" ranking.

 

Analysts' thoughts: While we expect a positive report on February retail sales, the numbers are probably going to be softer than investors would prefer. Consumer confidence rose from 81.7 in January to 84 in February, and while that will help retailers, what we have seen so far are retail figures rising slower than in January. Of the retailers that have already reported February sales, we see an average increase of 1.7%, which fine, but well below the 4.5% increase from January. Analysts forecast an average gain of 2.5%, and if the final report comes in too much below that level, retailers such as Kohl's could see serious selling pressure.

 

Stock-only trade: If you're looking to establish a long stock position in KSS, consider buying the stock when it is below $46.25 and sell if it falls below $41.50 or dips more than 10% or take profits if it gets to $53.25.

 

Option trade: If you are looking for a hedged options trade on KSS, consider an April 39/44 bull-put credit spread for a 50-cent credit. That's a potential 11.1% return (47.2% annualized*) and the stock would have to fall 3.8% to cause a problem.

 

Speculative call-only trade: For those of you with an appetite for higher risk and bigger returns, consider buying the October $46 call. If KSS rises just 7.2% 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.

 

 

Urban Outfitters reports fourth quarter results March 11

What's happening with URBN: Urban Outfitters (NASDAQ: URBN) has been trading in a sideways pattern since the start of the year despite the broad market making big gains. The stock enjoyed a strong second half of 2012, particularly immediately following Q2 earnings in August. The company is due to report its fourth quarter results on March 11 with analysts expecting earnings of $0.57 per share. During the same period last year the company had earnings of $0.27.

 

Technical analysis: URBN was recently trading at $40.74, down $3.41 from its 12-month high and $15.31 above its 12-month low. Technical indicators for URBN are bearish and the stock is showing signs of a possible trend reversal. The stock has recently seen support above $38.75 and resistance below $41.75. Of the 23 analysts who cover the stock ten rate it a "strong buy", two rate it a "buy", and 11 rate it a "hold". The stock receives Standard and Poor's 3 STARS "Hold" ranking.

 

Analysts' thoughts: We expect to see a strong quarter for Urban, which recently had a record holiday season. The company used seasonal offerings to boost holiday sales, and the company recently announced that it had a 17% jump in revenue during the quarter. While the majority of retailers struggled during the holiday season, Urban was able to use its strong name brand to boost sales and increase its direct-to-consumer business.

 

Stock-only trade: If you're looking to establish a long stock position in URBN, consider buying the stock when it is below $40.50 and sell if it falls below $36.50 or dips more than 10% or take profits if it gets to $46.50.

 

Option trade: If you are looking for a hedged options trade on URBN, consider a June 30/35 bull-put credit spread for a 55-cent credit. That's a potential 13.6% return (33.4% annualized*) and the stock would have to fall 12.6% to cause a problem.

 

Speculative call-only trade: For those of you with an appetite for higher risk and bigger returns, consider buying the September $39 call. If URBN rises just 9.9% 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.

 

                                                                                                       

Bloomberg reports Vodafone considering selling Verizon Wireless stake

What's happening with VOD: Shares of Vodafone (NASDAQ: VOD) have been under pressure since last summer, but the stock recently got a major bump on news that it is in talks with Verizon (NYSE: VZ) to possibly sell its stake of the company's joint venture, Verizon Wireless. Vodafone currently owns 45% of the venture, and while the talks are still informal, it points to a possible resolution in the not-so-distant future.

 

Technical analysis: VOD was recently trading at $27.00, down $3.07 from its 12-month high and $2.58 above its 12-month low. Technical indicators for VOD are bearish and the stock is showing signs of a possible trend reversal. The stock has recently seen resistance below $27.50. Of the nine analysts who cover the stock five rate it a "strong buy", two rate it a "hold", and two rate it a "strong sell". The stock receives Standard and Poor's 4 STARS "Buy" ranking.

 

Analysts' thoughts: 2013 has gotten off to a quick start for mergers and acquisitions, but a possible all-share merger between Vodafone and Verizon could dwarf anything we have seen so far. If Vodafone were to sell its 45% stake in Verizon Wireless to Verizon, it would be left with a huge tax bill, so analysts believe that a merger of the two companies might make more logical sense since it will delay the tax burden on Vodafone. Vodafone has seen its business in Europe languish in recent years, while the U.S. market has been growing. This has created a situation where it is relying more heavily on the U.S. business of Verizon Wireless, so the timing is right for the company to find a way to unwind its partnership. Expect to see the stock remain strong as more rumors continue to swirl.

 

Stock-only trade: If you're looking to establish a long stock position in VOD, consider buying the stock when it is below $26.50 and sell if it falls below $23.80 or dips more than 10% or take profits if it gets to $30.50.

 

Option trade: If you are looking for a hedged options trade on VOD, consider a July 20/25 bull-put credit spread for a 70-cent credit. That's a potential 16.3% return (33.6% annualized*) and the stock would have to fall 4.8% to cause a problem.

 

Speculative call-only trade: For those of you with an appetite for higher risk and bigger returns, consider buying the October $26 call. If VOD rises just 4.1% 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.

 

 

Johnson Controls may sell its automotive electronics unit

What's happening with JCI: Shares of Johnson Controls (NYSE: JCI) have been in a strong upward trend since last November, riding two consecutive quarters of better than expected earnings reports. The stock has recently received a lot of attention following reports that it is considering the sale of its automotive electronics unit. JCI is reportedly considering the sale in order to free up cash for more profitable units.

 

Technical analysis: JCI was recently trading at $32.63, down $1.82 from its 12-month high and $9.26 above its 12-month low. Technical indicators for JCI are bearish and the stock is in a weak upward trend. The stock has recently seen support above $30.50. Of the 21 analysts who cover the stock five rate it a "strong buy", two rate it a "buy", and 14 rate it a "hold. The stock receives Standard and Poor's 5 STARS "Strong Buy" ranking.

 

Analysts' thoughts: While there are still no concrete plans for Johnson Controls to sell its automotive electronics unit, we believe that it would be a smart move for the company. The unit represents a very small part of the company's overall revenue. Last year the company had total revenues of $42 billion, with its automotive electronics unit contributing just $1.4 billion. On the other hand, its auto parts unit generated 51% of the company's overall revenue, so we believe it makes good sense for the company to focus on its more sizable units.

 

Stock-only trade: If you're looking to establish a long stock position in JCI, consider buying the stock when it is below $32.50 and sell if it falls below $29.25 or dips more than 10% or take profits if it gets to $37.25.

 

Option trade: If you are looking for a hedged options trade on JCI, consider a July 24/29 bull-put credit spread for a 50-cent credit. That's a potential 11.1% return (22.9% annualized*) and the stock would have to fall 9.9% to cause a problem.

 

Speculative call-only trade: With the recent run up we have seen in JCI, we do not want to take on any speculative call-only trade. We believe there is too much risk and uncertainty to justify such a position at the current time.

 

 

 

*Annualized returns provided for comparison purposes only

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

The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Posted-In: Technicals Markets Trading Ideas

 

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