We’re knee-deep into earnings season. Some companies have delivered the goods, others have failed to impress. The market has rewarded and punished them accordingly. Today we’re highlighting three stocks to buy that all posted solid earnings.
But it’s not just about profits, as compelling as they may be. Remember, it’s not the news that matters to traders. It’s the reaction to the news. And today’s candidates all formed attractive price patterns following their respective reports. That, above all else, serves as the reason for my affection.
From a sector perspective, these picks come from three different areas of the Street. One is a copper giant. The second is a telecom titan. The third is a homebuilder capitalizing on the real estate boom.
Let’s review their earnings numbers and why I like their price charts. Then, I’ll share an options trade you can use to bank on continued upside.
Stocks to Buy After Great Earnings: Freeport-McMoRan (FCX)
The inflation trade is heating up in 2021. Copper prices have been ripping alongside other industrial commodities, and companies like Freeport-McMoRan have been massive beneficiaries of the trend. Roughly 80% of FCX’s revenue comes from copper. On the earnings front, Freeport reported EPS of 51 cents on $4.85 billion in revenue.
The numbers came in line with earnings expectations but slightly missed revenue forecasts of $4.87 billion.
But here’s the thing. The stock didn’t really budge – despite what could be described as less than stellar results. Given that FCX stock has climbed so much over the past six months, I think this is a huge win and bodes well for prices moving forward.
The pullback pattern has FCX testing its rising 50-day and 20-day moving averages. This is as good a buy-the-dip setup as any.
The Trade: Buy the June $35/$40 bull call spread for $1.80.
AT&T entered earnings with a chart in need of a boost. It’s been stuck in a trading range for the past year and found itself stuck in the middle heading into the event. Fortunately, the telecom and media giant released one of its best showings in years. For the first quarter, AT&T earned an adjusted 86 cents per share on revenue of $43.94 billion. Analysts were expecting 78 cents per share on $42.69 billion in revenue.
Though T stock closed well off its intraday highs, the close of $31.36 still places prices at the highest level of 2021. We’re now testing the upper end of the one-year range. Any kind of basing in this area could precede an upside breakout over major resistance at $32. This would finally turn the weekly trend higher and inject some excitement into what has otherwise been an extremely dull stock.
The improved outlook for AT&T’s fundamentals should help support the stock over the coming quarter. To capitalize, I like diagonal call spreads.
The Trade: Buy the June $30 call while selling the May $32 call for a net debit of $1.50.
Stocks to Buy After Great Earnings: D.R. Horton (DHI)
On Main Street, housing prices have been rapidly climbing in the wake of the pandemic. On Wall Street, traders have gobbled up homebuilding stocks as a way to bank on the trend. D.R. Horton is already up 39% year-to-date and just posted robust quarterly profits. That makes it a perfect final candidate for today’s stocks-to-buy gallery.
The Texas-based home construction company earned $2.53 per share on total revenue of $6.45 billion. Both metrics exceeded analyst forecasts. DHR stock ended the day with a powerful bullish engulfing candle at the rising 20-day moving average. Volume swelled throughout the session to confirm institutions and other big buyers entering the fray.
DHR is a choppier stock, so I fully expect some backing and filling along the way. But the trend direction is undeniably higher, and $100 beckons as the obvious next target.
The Trade: Buy the June $95/$100 for $2.15.
On the date of publication, Tyler Craig held LONG positions in FCX.
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