Although the earnings schedule is full once again next week, the lineup lacks the sizzle (translation: tech and financials) of the past couple of weeks. It’s a week filled with insurers, energy and food companies.
But we’re not interested in sizzle. We want solid trades. That’s why we like Herbalife Ltd. (NYSE:HLF), the nutritional supplement company.
HLF reports on Monday after the close. Analysts expect 75 cents per share, a 29% increase from a year ago. This growth rate would be the lowest in two years and is substantially less than the 38% HLF has averaged during the past four quarters.
HLF has an impressive track record of beating analysts’ earnings estimates. In fact, the company hasn’t had a miss for the past six years. (That’s as far back as our data goes.)
Performance after recent reports has been powerful as well. The shares have popped an average of 9.6% in just the one day following the past three reports.
On the charts, the stock has been treading water between $50 and $60 for the past six months. Currently the stock is sitting atop all its daily moving averages thanks to a 20% rally off its Oct. 4 low. Next up is the $60 level and then the all-time high above $63 reached in August. But that leaves at least 5% of upside room available based on Wednesday’s close.
Sentiment toward HLF is highly bullish, as one would expect for a stock that’s up 67% this year. All 10 covering analysts consider the shares a “Buy,” which could be a concern. But the shares could always benefit from additional coverage.
With a strong record of beating earnings estimates, modest expectations, and solid bullish moves following reporting, we like HLF’s chances next week. Buy the in-the-money HLF Nov 55 Call up to $4.50.