Retail giant Wal-Mart ( WMT ) is scheduled to report its fourth-quarter results on February 21. The company will report its quarterly numbers before the market opens, with the consensus calling for earnings of $1.30 per share, on revenue of $130.97 billion. The stock has risen a modest 0.3% on the year.
WMT was recently trading at $68.87, down $6.32 from its 12-month high and $6.52 above its 12-month low. Technical indicators for WMT are bearish but the stock is showing signs of a possible trend reversal. The stock has recent support above $65.50 and recent resistance below $69.25. Of the 23 analysts who cover the stock, eight rate it a "strong buy", 12 rate it a "hold", and three rate it a "strong sell". The stock receives S&P Capital IQ's 5 STARS "Strong Buy" ranking.
WMT shares have been trending higher over the last month, but in order for the stock to build on its recent gains the company will need to show solid results for its fourth-quarter. Brick and mortar retailers have been punished in recent years by growing e-commerce competition, most notably from Amazon.com ( AMZN ), but Wal-Mart has made big strides in recent years to improve its online business. The company has invested a lot of money in its online business, and Wall Street wants to see ongoing improvements in the company's online business. Last quarter the company reported a 21 percent jump in online sales, much stronger growth than the 12 percent gain it enjoyed the previous quarter. Wall Street will pay close attention to the how strongly online sales grew in the most recent quarter. In addition to the company investing heavily in its e-commerce business, it has also been investing a lot in its employees, with additional training and wage hikes, which most analysts agree is starting to result in higher customer satisfaction, but the investments are hurting the company's bottom line in the short term. Earnings are expected to fall by 5.9% this year, before remain relatively flat in 2018. The earnings decline has been priced into the stock, which now trades with a P/E of just 14.9, so as long as the company is able to post results at least in-line with the consensus the stock should continue to make back some of its recent gains.
Stock Only Trade
If you want to set up a bullish hedged trade on WMT, consider an April 60/62.50 bull-put credit spread for a 20-cent credit. That's a potential 8.7% return (50.4% annualized*) and the stock would have to fall 9.0% to cause a problem.
If you want to take a bearish stance on DE at this time, consider a June 75/77.50 bear-call credit spread for a 30-cent credit. That's a potential 13.6% return (41.8% annualized*) and the stock would have to rise 9.3% to cause a problem.
Covered Call Trade
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