When it comes to trading, the term “lumbering” is probably the last way you want to describe your holdings. But lately, there’s nothing lumbering about flooring supply retailer Lumber Liquidators (LL). The stock has been laying down big profits for shareholders, delivering an incredible gain of nearly 160% during the past 12 months.
A consistent string of big earnings beats during the past five quarters has kept this stock powering higher, and if Lumber Liquidators can do it again on July 24 when it’s set to report results for the second quarter, we could see more upside in this technical and fundamental stalwart.
The consensus estimate for Q2 revenue is $242.8 million, while EPS for the quarter is expected to come in at 60 cents. Both of these numbers would represent big growth over the same quarter a year ago, but that’s nothing new for LL. I suspect that if we see another strong earnings beat the way we have over the past year, we are going to see another leg higher in LL shares.
Now, technically speaking, LL stock is in what’s known as a third-stage base. What this means is that while there is still upside in the stock, there’s also a possibility that if earnings don’t impressive, we could see a selloff that will take the stock below the 50-day moving average. And while this risk is real, the greater risk in my opinion is to not buy LL. If the earnings come in better than expected, you should see this stock continue to push to more new highs.
If you buy LL here at the market in front of the July 24 earnings, and you could be staring at a 15% upside move over the next six to eight weeks. Of course, if earnings disappoint, then you’ll want to make sure you don’t get slammed. So, place a tight stop-loss order in at about 5% below your buy order just to be safe.
At the time of publication, Jim Woods held no positions in the stocks mentioned.