Daily Report

This report is posted right here every trading day one hour before "the close". We run all of the searches and select our most bullish and bearish candidate of the day. This report includes live updates for stocks in our watch list that are on the move.

Issue     05/29/2012 Recent Reports     Past Reports    

Bullish WFM
Stock Whole Foods Market, Inc. engages in the ownership and operation of natural and organic food supermarkets.
Set-up Looks for stocks that have been in an uptrend and have stalled for a few days. Today the stock is breakingout to a new 10-Day high.
Chart

This stock broke through $75 resistance and it continued to rally. It peaked at $90 in May and it pulled back with the market. The stock has been able to hold the $85 breakout and it is rebounding. With a little help from the market, it looks poised to take out the highs.
 Outlook

In May, the company said revenue rose nearly 14 percent to $2.67 billion, meeting market expectations. The company got a revenue boost from the Easter holiday shifting from the third quarter last year into the second quarter this year.

Whole Foods said revenue at its stores open at least a year rose 9.5 percent. This is considered a key measurement of operating performance because it strips away the impact of recently opened or closed stores.

The company earned $117.7 million, or 64 cents per share, for the quarter that ended April 8. That's up from $89.9 million, or 51 cents per share, in the same quarter last year.

The stock trades at a forward P/E of 31.
Tactic

Whole Foods co-founder and co-CEO John Mackey said that this was the best quarter in the company's 32-year history.

"Our exceptional results in the first half of the year have given us the confidence to significantly raise our guidance for the full year. We are confident that our sales momentum and operating disciplines will create continued positive results for our shareholders," Walter Robb, co-CEO said in a statement.

Whole Foods now expects to earn $2.44 to $2.47 per share for the full year on added stores and continued sales gains. That's up from its prior expectations of $2.28 to $2.32 per share for the year. The new earnings guidance beats the $2.34 per share that analysts previously expected.

The company introduced lower priced organic items and same store sales were up a robust 9.5%. I also like the raised guidance. It has always traded at a lofty P/E and it has been able to maintain revenue growth for years.

The stock pulled back and it filled in the gap. It rallied back above the breakout and it held up well during the market decline. The stock is in a strong up trend and I like selling the June $85 puts and buying the June $80 puts for a $1.00 credit. The stock will have to pullback for us to get that credit and I believe the market is vulnerable.

Be patient and wait for a good entry point. If the SPY closes above the 100-Day MA, consider buying ITM July calls.
Stop



Earnings



Bearish TSCO
Stock Tractor Supply Company operates retail farm and ranch stores in the United States. Its stores offer a selection of merchandise, including equine, pet, and animal products, such as items required for their health, care, growth, and containment; hardware, truck, towing, and tool products; seasonal products, including lawn and garden items, power equipment, gifts, and toys; maintenance products for agricultural and rural use; and work/recreational clothing and footwear.
Set-up Stock opened near its high and is trading near its low on expanded daily range. Stock is trying to reverse recent rally and resume longer-term down trend.
Chart

This stock rallied from $70 in January and it broke through $75 resistance in February. It peaked at $100 in April and it stalled. The stock pulled back with the market and it retested resistance. Today, it dropped 8% on heavy volume. The price action looks very toppy.
 Outlook

In April, the company said net sales increased 22.0% to $1.02 billion from $836.6 million in the prior year's first quarter. Same-store sales increased 11.5% with broad-based strength across all major product categories and driven, in part, by early spring weather in 2012.

Same-store sales for the first quarter of 2011 increased 7.6%.

Net income for the quarter was $40.3 million, or $0.55 per diluted share, compared to net income of $18.3 million, or $0.24 per diluted share, in the first quarter of the prior year.

The stock trades at a forward P/E of 21.
Tactic

Jim Wright, Chairman and Chief Executive Officer, stated, "We are delighted to have reached another milestone, achieving record first quarter sales in excess of one billion dollars for the first time in Tractor Supply's history. Customers responded favorably to our spring products and the continual enhancements we have been making to our merchandise assortments. Our proactive planning allowed us to capture the earlier spring selling season in Southern markets and we reacted quickly to capitalize on the early spring weather seen in March. We continue to evolve our assortments and the in-store experience to ensure we have the right product and marketing programs in place to keep customers highly engaged throughout the spring and summer selling seasons."

For the full-year 2012, the Company expects net sales to range between $4.61 billion and $4.68 billion, same-store sales to increase 4.0% to 5.5% compared to 2011 and net income to range between $260 million and $265 million, or $3.52 to $3.60 per diluted share.

Investment research firm Cleveland Research said Tractor Supply's same-store sales had slowed in the last month, and lowered its estimate of same-store sales growth for the farm equipment retailer.

This stock has been in a steady uptrend and it trades at a fairly rich forward P/E. It hit resistance at $100 and it has not been able to penetrate that level in the last 2 months. Today, it is backing off on strong volume. If the channel checks from this research firm are accurate, the stock will pull back.

I like selling the July $100 calls and buying the July $105 calls for a net credit of $1.00. Without any confirmation (warning) from the company, the stock should be able to tread water and it might rebound slightly. For this reason, I like selling the call spread.

The dip today seems a bit extreme. I suggest waiting to see if it rebounds slightly. If it does, you might be able to get a $.85 credit for the June $100 - $105 call spread.
Stop



Earnings