Credit: Shutterstock photoWhat's Happening
Consumer goods maker Campbell Soup will announce its second-quarter results on February 17. The company will report its quarterly results before the market open, with the consensus calling for earnings of $0.88 per share on revenue of $2.22 billion. The stock is currently up 4.9% on the year.
Technical Analysis
CPB was recently trading at $63.59, down $4.30 from its 12-month high and $11.01 above its 12-month low. Overall technical indicators for CPB are bullish with a strong upward trend. The stock has recent support above $61.90, and resistance below $64.25. Of the 12 analysts who cover the stock, one rates it a "strong buy", nine rate it a "hold", and two rate it a "strong sell". The stock receives S&P Capital IQ's 3 STARS "Hold" ranking.
Analyst's Thoughts
CPB is in the midst of a nice rally after enduring a long sell off during the latter part of 2016, and if the company is able to post solid quarterly numbers the stock should build on its recent gains. With the recent rally in the stock, valuation is becoming a concern, with a P/E of 29.8. Analysts see the company growing earnings by a modest 4.8% this year, which is a bit low to warrant the stock's current valuation. The street has a whisper number of 89 cents, a penny above the consensus, indicating a good likelihood that the company will report earnings that are at least in-line with the consensus. The stock has been trending higher since the company's last earnings report in November, but the stock will quickly give back some of its recent gains if Q2 numbers fail to impress the street. Analysts have an average price target of $59.33 on the stock (versus its current price of $63.59), so there is some downside risk. Current shareholders should consider having an exit plan in place just in case results are unable to hit the street's forecast.
Stock Only Trade
If you're looking to establish a long stock position in CPB, consider buying the stock under $63.50. Sell if it falls below $57.25 or take profits if it gets to $73.00.Bullish Trade
If you want a bullish hedged trade on the stock, consider a May 52.50/57.50 bull-put credit spread for a 25-cent credit. That's a potential 5.3% return (19.6% annualized*) and the stock would have to fall 9.2% to cause a problem.
Bearish Trade
If you want to take a bearish stance on the stock at this time, consider a May 70/75 bear-call credit spread for a 25-cent credit. That's a potential 5.3% return (19.6% annualized*) and the stock would have to rise 10.5% to cause a problem.
Covered Call Trade
If you like the stock, but wish to lower your cost basis on a new position, you may want to consider a May $65.00 covered call. Buy CPB shares (typically 100 shares, scale as appropriate), while selling the May $65.00 call for a debit of $61.60 per share. The trade has a target assigned return of 5.5%, and a target annualized return of 20.8% (for comparison purposes only).The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Originally published on InvestorsObserver.com
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
