We love earnings cycles and although we wish there was another stock besides Alcoa (AA, $9.14, up $0.04) that “officially” opens each quarter, it’s show time on Wall Street.
Earnings seasons are when stocks can make tremendous moves of 5%-10% or more based on what they say. Of course, each company will have different excuses for not meeting expectations and will blame Super Storm Sandy or the Fiscal Cliff, Debt Threat, the zombies and Obamacare as reasons on why they missed expectations.
The companies that beat the suit-and-ties forecasts have trimmed the fat, redesigned themselves, or have hot products and services that people want and are buying. The bar has already been lowered because of the aforementioned headwinds so we will be interested in what companies say about their full-year outlook rather than the quarter that just ended.
Alcoa is expected to post a profit of 6 cents a share on revenues of $5.6 billion. Shares hit a 52-week low of just under $8 back in October 2012 on its 3Q report. We have recommended the stock a few times over the past couple of years as successful covered call trades for our Weekly Wrap but we currently do not have a position in Alcoa.
The options are pricing a 5% move in the stock as the January 9 calls (AA130119C00009000, $0.30, flat) and the January 9 puts (AA130119P00009000, $0.20, flat) are going for 50 cents, together. With shares at $9, a 45-50 cent move is being priced in.
While we will be watching Double-A’s earnings, we were impressed with Monsanto’s (MON, $98.42, up $2.48) numbers as the stock pushes fresh 52-week highs. Shares look poised to crack triple-digits and have traded to $99.99 today.
We mentioned on our Watch List this morning Potash (POT, $41.79, up $0.11) could see a pop and shares have traded up to $42.08 today. We have 2 earnings trades in play so we will be passing on Alcoa which should match or beat Wall Street’s penciled-in numbers.
A good quarter by Alcoa could help the Dow on Wednesday and is struggling again today as the bears are trying to crack support that served as prior resistance. The good news, like yesterday, support is holding. (read more…)
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