Though earnings season is definitely on the decline, there’s plenty to consider next week. Some 250 companies are reporting, with about 10% of those coming from the S&P 500.
Retail is a dominant sector next week, with entries coming from home improvement stores Lowe’s Companies, Inc. (NYSE: LOW) and The Home Depot, Inc. (NYSE: HD), department stores Nordstrom, Inc. (NYSE: JWN) and Sears Holdings Corporation (NASDAQ: SHLD), and specialty stores Urban Outfitters, Inc. (NASDAQ: URBN)?, Abercrombie & Fitch Co. (NYSE: ANF), The Gap Inc. (NYSE: GPS) and Limited Brands, Inc. (NYSE: LTD), to name a few of the big ones. Oh yeah, and a little outfit called Wal-Mart Stores, Inc. (NYSE: WMT) on Tuesday.
We sorted through the retail pile and came up with Dillard’s, Inc. (NYSE: DDS), which reports next week (we’re seeing conflicting information on the exact day, though it looks like Monday). The company beat the earnings estimate for six quarters in a row before missing last quarter. Analysts expect a profit of 5 cents per share compared to a 3-cent loss a year ago.
Some question the company’s ability to meet expectations. After all, DDS fell short of third-quarter revenue predictions after reporting a 1% drop in October same-store sales. But those numbers are probably baked into the share price already, and the stock has bounced back after the news, which gives some encouragement for next week.
Actually, the stock tends to do pretty well following earnings, gaining an average of 7.4% in the week following the past four reports. That includes a gain of nearly 9% after missing the estimate last quarter.
The DDS chart is hardly awe inspiring, though the shares have gained 55% this year. With no moving averages overhead, the next hurdle is the April high above $31, which leaves around 9% of upside room to play with. That’s plenty for an option play.
Sentiment toward DDS is mixed, with option players showing a preference for calls, while the short-interest ratio is relatively high. Strangely, DDS is covered by only two analysts. But new coverage usually is positive, so we take that as a bullish sign.
While we’re not expecting a huge pop in DDS next week, we expect earnings to help the stock challenge its 2010 high within the next month. As such, consider the DDS Dec 28 Calls, which are currently trading around $2.
Chris Johnson appeared on CNBC’s “Closing Bell” segment Wednesday night with Maria Bartiromo to talk about analyst rankings and ETFs. To see the video and learn how we use these rankings in our trading, click here.
