The earnings calendar resembles a shopping mall this week, with more than a few specialty retailers on tap to report. Urban Outfitters (NASDAQ: URBN), American Eagle (NYSE: AEO), Hot Topic (NASDAQ: HOTT), J Crew, Aeropostale (NYSE: ARO), and AnnTaylor Stores (NYSE: ANN) are just a few of the names on this week’s schedule.
In addition, options trading investors should note that various food names will also have a seat at the earnings table, with Boston Beer (beer is a food, right?) (NYSE: SAM), Diamond Foods (NASDAQ: DMND), Del Monte (NYSE: DLM), and Smithfield Foods (NYSE: SFD) on the docket. Food stocks have come under increasing scrutiny for their ability to pass on rising input costs. So far, though, the results for many of the bigger names have been encouraging.
With that in mind, we’re taking a closer look at Smithfield, one of country’s top meat producers. SFD reports earnings on Thursday before the open, with analysts expecting 66 cents per share, triple the figure of a year ago. That may sound high, but consider that the company logged 80 cents per shares last quarter. Beating earnings estimates has been routine for SFD of late; the company has met or topped the consensus forecast for five straight quarters.
A quick look at SFD’s biggest competitors is encouraging. Both Tyson Foods (NYSE: TSN) and Hormel Foods (NYSE: HRL) beat their earnings estimates handily in February. More importantly, both stocks popped higher on the news in part because they were able to pass on higher raw material costs to consumers. That should help SFD as well.
The stock has been trading sideways for the past month, using the 22 level as a base. The shares pulled back to that support on Monday, so the stock could be set for another rebound up to at least the top of the range around 23.
Sentiment is mixed, with neither the put/call or short-interest ratios showing much conviction either way. But analysts are reserved, with six of 13 “holds.” That could lead to upgrades should the company impress on Thursday.
With a strong recent earnings track record, competitors reporting strong numbers based on improved pricing power, chart support, and mixed sentiment, SFD is set up well to pop above resistance at 23. Buy the SFD April 22 Call for $1.50 or less, which should give the stock plenty of time to grind higher after earnings.
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