Michael Fowlkes' Analyst Insights
Options and ETF Analyst Writer
Campbell Soup to release fiscal Q1 numbers November 20
11/17/2018 12:53 PM
Campbell Soup (CPB) will release its fiscal first-quarter numbers before the market open on November 2. Analysts forecast earnings of $0.69 per share, down from $0.92 during the same period last year. The stock has struggled this year, with shares falling 18.3% year to date.
CPB was recently trading at $38.98 down $12.09 from its 12-month high and $6.34 above its 12-month low. InvestorsObserver’s Stock Score Report gives CPB a 57 long-term technical score and a 45 short-term technical score. The stock has recent support above $36 and recent resistance below $40. Of the 11 analysts who cover the stock 2 rate it Strong Buy, 0 rate it Buy, 4 rate it Hold, 1 rate it Sell, and 4 rate it Strong Sell, CPB gets a score of 40 from InvestorsObserver’s Stock Score Report.
Campbell Soup suffered a big stock drop during the first half of the year, but the stock has stabilized since mid-summer and has been trading sideways for the last several months. The company has posted better than expected earnings the last three quarters, but sales have fallen short of estimates in each of the last two quarters. The stock has suffered as the company has struggled to maintain earnings. Profits for the full year are expected to fall 15% versus last year, and this quarter by 25%. The good news for investors is that the earnings drop has already been priced into the stock, so the number alone will not hurt shares as long as profits do not drop more than expected. The street is expecting a small miss, with a whisper number of $0.68. While it is never good to see a whisper number lower than the consensus, it does give the stock a little cushion just in case Campbell does miss its estimate by the penny the street expects. Wall Street remains cautious on the stock, and it will take some strong earnings beats for that to change. If results are in-line or slightly better than expected the stock will likely continue to trade sideways or just slightly higher while the company continues to work towards returning to earnings growth, which is not expected to happen any time soon. CPB is trading at $38.88 with an average price target of $38.55.
Stock Only Trade
If you're looking to establish a long stock position in CPB consider buying the stock under $39. Sell if it falls below $36 or take profits if it gets to $45.
If you want a bullish hedged trade on the stock, consider a 1/18/19 29/34 bull-put credit spread for a $0.40 credit. That's a potential 8.7% return (50.3% annualized*) and the stock would have to fall 13.1% to cause a problem.
If you want to take a bearish stance on the stock at this time, consider an 1/18/19 43/48 bear-call credit spread for a $0.45 credit. That's a potential 9.9% return (57.3% annualized*) and the stock would have to rise 12.3% 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 1/18/19 $38 covered call. Buy CPB shares (typically 100 shares, scale as appropriate), while selling the 1/18/19 $38 call for a debit of $36.19, per share. The trade has a target assigned return of 5.0%, and a target annualized return of 29% (for comparison purposes only).
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