This week is a big one for earnings, as more than 130 S&P 500 companies are on the schedule. Among the IBMs, Apples, eBays, Goldman Sachs and Morgan Stanleys of the world is AutoNation, Inc. (NYSE: AN), the Fort Lauderdale-based auto retail giant. AN is scheduled to report on Thursday, July 22. 

Analysts expect AN to post a 24% increase in profits from a year ago, which is the smallest such increase of the past year. Also, AN has a history of doing well in the earnings confessional, having beaten the past six consensus estimates. And after the past three reports, the stock has gained ground over the next week.

On the charts, the stock is in the midst of rebounding off solid support at the $18 level. The shares are currently sitting on their 50-day moving average, and after that, it’s clear sailing to the June high near $22.

Sentiment toward AN is tilted toward the pessimistic camp, which suggests pent-up buying power. The short-interest ratio sits around six, which could lead to a short-squeeze rally. And analysts have plenty of room for adding some love to the shares, as just three of nine recommend AN as a “buy.”

The company recently announced strong new car sales for June, which bodes well for next week’s report. And the Street’s overall cautious attitude toward AN tells us that expectations are low. With a history of beating earnings, look for another beat and subsequent strong price action next week. 

The in-the-money AN Aug 20 Call should do the trick heading into AN’s report.

Double Your Money on the Rumor AND the News
Learn how to cut through the rumor and manipulation surrounding corporate earnings announcements and bank money-doubling option trades all year long. Download our FREE trading guide here.