Best ETFs to Buy Now for June 2022

Investors continue to weather the market storms as volatility has become the norm. Selling is rampant, frightening investors with the uncertainty. Naturally, they’re seeking safety.

But money is flowing into certain sectors, which I’ll show you in a bit. First, let’s talk about Big Money – what it is, how it moves markets, and what it’s been doing lately.

Markets and Big Money in the Last 6 Months

My research firm, MAPsignals, measures Big Money investor activity. That includes institutions, pension funds, big individual investors, and so on. Our research shows Big Money moves markets. And right now, Big Money has been selling stocks and ETFs, driving markets downward:

Chart, histogram Description automatically generated

That’s making major indices dip along with the Big Money Index (BMI), which is a 25-day moving average of large-scale investor buy and sell activity. It’s nosedived recently and could be headed for more of the same:

In the face of uncertainty, investors seek safety. It’s coming in certain sectors, like energy, staples, utilities, and other traditionally defensive areas. Given these conditions, we’ve identified some ETFs we think have great long-term potential: IYE, FCG, FTXG, FXU, and XLP.

Long-term investors should look for ETFs (and their stocks), with great setups. Remember, ETFs are just baskets of stocks, so we need to look at them in detail. MAPsignals specializes in scoring more than 6,500 stocks daily. If I know which stocks compose the ETFs, I can apply stock scores to the ETFs. Then I can rank them all from strongest to weakest.

Let’s get to the five best ETF opportunities for June 2022.

iShares U.S. Energy ETF (IYE) Analysis

The current geopolitical situation has brought oil and gas back to the forefront while driving up prices for energy. As you can see, Big Money has been buying IYE in chunks over the past year, with heavy buying starting in October 2021 and really ramping up this year:

IYE holds several big stocks. One example is Occidental Petroleum Corp. (OXY), which has 1-year sales growth of 51.5% and a profit margin of 10.7%. Investing legend Warren Buffett recently announced a big stake in OXY too. Here is the one-year Big Money action for OXY:

First Trust Natural Gas ETF (FCG) Analysis

Natural gas is seen by some as a bridge energy source between fossil fuels and cleaner sources like wind, partly because of its ample supply. As global energy markets continue to shift, natural gas is becoming more popular. Big Money has been buying too, which always helps:

One great stock FCG holds is Coterra Energy Inc. (CTRA). This independent oil and gas company has seen big three-year sales growth of 41.5% and sports a profit margin of 31.6%. Earnings have been strong too, growing 106% over three years. The Big Money is jumping in on CTRA:

First Trust NASDAQ Food & Beverage ETF (FTXG) Analysis

We can always count on food demand, right? It’s biological. Well, in all seriousness, global demand for food as well as the products and services used to create it is strong and made stronger by geopolitical issues. That’s reflected in FTXG. While there have been some dips, the trend on this one points up:

A fantastic stock within FTXG is Archer-Daniels-Midland Company (ADM), the food processor and producer of agricultural commodities. It’s rocketed since the new year, which isn’t surprising given its growing sales (one-year sales growth of 32.4%) and three-year EPS growth of 19.1%. ADM has been drawing in lots of Big Money:

First Trust Utilities AlphaDEX Fund (FXU) Analysis

When investors seek safety, that often means utilities that pay dividends. As always with ETFs, fundamental strength within underlying assets is a high priority. We see that with FXU, which has peaks and valleys along the way, but an overall positive trajectory:

One rock-solid dividend stock within this ETF is NRG Energy, Inc. (NRG), an energy producer, seller, and distributor. Big Money has been all over it recently, with nine buy signals in the last month alone. NRG grew sales in one year by 200% and EPS by 314% over three years. It pays a nearly 3.1% current dividend and has jumped in price significantly since a year ago:

Consumer Staples Select Sector SPDR ETF (XLP) Analysis

It’s rare to get excited about consumer staples, but it’s justified right now. XLP holds huge household names and has seen Big Money lifting its price recently. It’s clear that in the past year, buying at the low points has worked out:

One great stock in XLP is Costco Wholesale Corporation (COST), the bulk warehouse retailer. COST is fundamentally strong – it has one-year sales growth of 17.5% and a three-year EPS growth rate of 16.7%. But it’s down 24% this year so far. However, it wouldn’t surprise me to see this one rise again (it’s had 48 Top 20 Big Money buy signals since 1991):

Here’s a Big Money recap:

  • When Big Money buying heats up, stocks and ETFs tend to rise
  • Deep selling on great quality can be a phenomenal opportunity
  • Repeated buying usually means outsized gains

Bottom Line and Explanatory Video

 

IYE, FCG, FTXG, FXU, and XLP are my top ETFs for June 2022. They cover mostly defensive sectors where money is flowing in as investors seek shelter. These picks can rise higher, in my opinion, largely because they each hold great stocks. With markets rocky, safety is at a premium, and these ETFs are proving to be havens right now.

To learn more about MAPsignals’ Big Money process please visit: www.mapsignals.com

Disclosure: the author holds no positions in IYE, FCG, FTXG, FXU, XLP, OXY, CTRA, ADM, or NRG in at the time of publication, but holds long positions in COST in managed accounts.

Contact:

https://mapsignals.com/contact/

Costco Shares Resilient in a Tough Market

Costco Wholesale Corp. (COST) fell 1.4% on Friday, despite better-than-expected Q2 2022 top and bottom line results. The company failed to raise guidance, raising shareholder anxiety about profit margins, given the twin headwinds of rising inflation and macro political events. Fortunately, the big box giant’s international exposure is mostly confined to Mexico, Canada, and Western Pacific allies, despite widespread headlines when China’s one store opened in 2019.

Long-Time Retail Rock Star

Costco’s low churn reflects high member loyalty, driven by a narrow focus on value. Online sales are growing at a rapid pace as well, reflected in the quarter’s solid metrics. Membership fee income grew by 9.8% while USA, Canada and worldwide renewal rates rose 92.0% and 89.6%, respectively. E-commerce grew by 12.5%, adding to extraordinary growth of 75.8% in the same quarter last year. Meanwhile, strong growth should continue in gasoline sales, which typically boom when crude oil prices impact consumer buying power.

Telsey Advisory Group analyst Joe Feldman raised his target to $615 on Friday, noting that Costco reported “impressive 2QF22 earnings, and the strong sales momentum continued in February. The company’s 2QF22 adjusted EPS came in at $2.92, easily beating our inline estimate of $2.75, reflecting a strong headline comp of 14.4%  and better-than-anticipated adjusted operating margin expansion of 50 bps to 3.5%.Overall, Costco’s 2QF22 EBIT dollars showed a healthy increase of ~35% to $1.8B, a sign of profitable market share gain”.

Wall Street and Technical Outlook

Wall Street consensus stands at an ‘Overweight’ rating based upon 17 ‘Buy’, 4 ‘Overweight’, 11 ‘Hold’, and 2 ‘Underweight’ recommendations. No analysts are recommending that shareholders close positions. Price targets currently range from a low of $284 to a Street-high $650 while the stock is set to open Monday’s session about $50 below the median $572 target. This placement suggests that Costco will build on gains when current volatility levels revert to the mean.

Costco has been a market leader for years, posting superior annual returns. It didn’t skip a beat after the March 2020 selloff, breaking out in a new uptrend in July. A steep pullback got bought aggressively in March 2021, ahead of an intense buying wave that added nearly 70% into December’s all-time high at 571.49. Profit-taking since that time has been orderly, with price action holding well above the 200-day moving average in the 470s. There’s little reason to believe, at least at this time, that sellers will break that trading floor.

Catch up on the latest price action with our new ETF performance breakdown.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Why Costco Stock Is Down By 3% Today

Key Insights

  • Costco’s quarterly report easily beat analyst expectations, but the stock moved lower. 
  • The stock market is nervous as the second round of negotiations between Russia and Ukraine yielded no results. 
  • In this environment, a strong report from Costco failed to provide enough support to its shares as the company is valued at more than 35 forward P/E. 

Costco Stock Drops Despite Strong Report

Shares of Costco  gained downside momentum after the company released its quarterly report.

Costco reported revenue of $51.9 billion and earnings of $2.92 per share, beating analyst estimates on both earnings and revenue. The company’s comparable sales grew by 11.1% in the fourth quarter, adjusted for the cost of fuel and currency dynamics.

Costco’s earnings also showed strong growth as the company reported profit of $2.14 per share a year ago. The company also noted that it managed to mitigate cost despite supply chain issues.

However, the strong report failed to provide enough support to Costco stock, which made an attempt to settle below the $515 level.

What’s Next For Costco Stock?

Analysts expect that Costco will report earnings of $12.93 per share in the current fiscal year and earnings of $14.13 per share in the next fiscal year, so the stock is trading at roughly 37 forward P/E.

This is not cheap for a retailer, and the current valuation may present a problem in case S&P 500 continues to move lower. In this scenario, traders will pay more attention to high-PE companies, and any bad news could serve as a perfect excuse to get out of such stocks.

While Costco is a defensive stock, it may not get enough buyers in case the market starts to worry about the scenario which includes higher prices but lower growth due to the current rally in the commodity markets.

For a look at all of today’s economic events, check out our economic calendar.

Best Stocks, Crypto, and ETFs to Watch – Costco, Gold, Raytheon in Focus

Stocks

Costco Wholesale Corp. (COST) has held up better than rivals Target Corp. (TGT) and Walmart Inc. (WMT) so far in 2022, trading well above the 50-week moving average near 460.  The big-box retailer will have an opportunity to build on recent gains after Thursday’s Q2 2022 earnings report, which is expected to show a healthy profit of $2.72 per share on $51.36 billion in revenue. The stock rose more than 6% after beating Q1 estimates in December.

Raytheon Technologies Corp. (RTX) makes missile systems, aircraft engines, and an assortment of surveillance and military-intelligence apparatus.  The Ukraine war has reawakened buying interest in the stock, generating a cup and handle breakout above resistance in the 90s. iShares US Aerospace and Defense ETF (ITA) has lifted to a two-year trendline at the same time, setting the stage for a sector-wide breakout that could yield major upside in coming weeks.

Dow component Salesforce Inc. (CRM) reports earnings after Wednesday’s closing bell, with analysts looking for a profit of $0.75 per-share on $7.24 billion in revenue. The stock hasn’t fared well since joining the venerable index in August 2020, dropping 17%, and is currently trading near a 52-week low. However, it bounced strongly at the 200-week moving average on Thursday, raising odds for an intermediate rally that could add 30 points before bears return in force.

ETFs

SPDR Gold Trust (GLD) rallied to a 13-month high last week before stalling within 12-points of 2020’s all-time high. The fund reversed into week’s end, leaving behind a bearish shooting star candlestick that predicts the rally is over, at least for now. However, the monthly chart has completed the next leg of a cup and handle pattern going back to 2011, raising odds for an historic breakout that lifts the yellow metal to 3,000 and the fund to 300.

Cryptocurrencies

Bitcoin (BTC) sold off within 1,500 points of the January low at 32,950 on Thursday and bounced with equity markets, continuing mixed price action that’s testing 2021 support around the 30,000 level. It isn’t wise to look for sustained upside while this process unfolds because an active monthly sell cycle is still in control of the ticker tape. In the meantime, 44,000 looks like the resistance level to watch for a sustained breakout.

Catch up on the latest price action with our new ETF performance breakdown.

Disclosure: the author held SPDR Gold Trust in a family account at the time of publication. 

Wall Street Week Ahead Earnings: Zoom, Salesforce, Domino’s, Dollar Tree and Broadcom in Focus

Traders have been rattled by geopolitical tensions over the Russia-Ukraine crisis, which has caused the global stock market to suffer. The S&P 500 plunged into correction territory. If tensions continue for long, analysts fear that it will be harder for the U.S. Federal Reserve to raise rates after next month’s hike. Due to this, investors sought safe-haven assets and U.S. Treasury yields fell as tensions between Ukraine and Russia increased. In addition, investors will focus on December quarter earnings for stocks that are economically sensitive, which should show better profits than technology stocks amid surging inflation.

Earnings Calendar For The Week Of February 28

Monday (February 28)

IN THE SPOTLIGHT: ZOOM

The San Jose, California-based communications technology company Zoom is expected to report its fiscal fourth-quarter earnings of $0.67 per share, which represents a year-over-year decline of nearly 24% from $0.88 per share seen in the same period a year ago.

The company, which provides video telephony and online chat services through a cloud-based peer-to-peer software platform, would post revenue growth of 19% to $1.05 billion.

“We have seen a reluctance of investors around Zoom given recent performance of WFH winners. Look to FY23 guide as opportunity to reset Street expectations, giving investors a cleaner path to getting involved. Remain OW on early days company at upselling large installed base with ancillary products,” noted Meta Marshall, equity analyst at Morgan Stanley.

Zoom has established its position as the leader in video conferencing, now a growth market. Company has meaningful competitive moat built on more than just architecture. Position within customers makes an attractive opportunity to expand into broader UC market. Early wins encouraging. Opportunities to expand platform remain. Manageable churn post-COVID as move to hybrid work setups continues.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 28

TICKER COMPANY EPS FORECAST
AMBA Ambarella $-0.04
HPQ HP $1.04
NVAX Novavax $0.36
SBAC SBA Communications $2.62
SDC SmileDirectClub $-0.28
WDAY Workday $-0.19

 

Tuesday (March 1)

IN THE SPOTLIGHT: SALESFORCE.COM, DOMINO’S PIZZA

SALESFORCE.COM: The San Francisco, California-based software company is expected to report its fourth-quarter earnings of $0.75 per share, which represents a year-over-year decline of over 27% from $1.04 per share seen in the same period a year ago.

However, the leading provider of enterprise cloud computing solutions would post revenue growth of nearly 25% to $7.24 billion up from $5.82 billion a year earlier. The company has beaten consensus earnings estimates in most of the quarters in the last two years, at least.

Salesforce.com (CRM) is down 35% since reporting F3Q vs. IGV down 25% due to software selloff, investor fears around demand-pull forward and MuleSoft, and tougher compares in 1HF23. Our survey indicated 88% expect their pipelines to grow with 37% expecting growth of 20%+ in F23. Despite a tough set-up heading into the Q, expectations are low. CRM offers attractive risk-reward as it trades close to trough levels at 5x ’23 rev. vs. comps at 9x (40% discount). Maintain Buy,” noted Brent Thill, equity analyst at Jefferies.

DOMINO’S PIZZA: The world’s largest pizza restaurant by sales is expected to report its fourth-quarter earnings of $4.30 per share, which represents year-over-year growth of about 12% from $3.85 per share seen in the same period a year ago.

The Ann Arbor Michigan-based company has beaten consensus earnings estimates in most of the quarters in the last two years, at least. The largest pizza chain in the world would post revenue growth of 2% to around $1.38 billion from $1.36 billion a year earlier.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE MARCH 1

TICKER COMPANY EPS FORECAST
AZO AutoZone $16.42
AVID Avid Technology $0.33
BIDU Baidu $1.49
DPZ Domino’s Pizza $4.30
JAZZ Jazz Pharmaceuticals $2.96
JWN Nordstrom $1.05
ROST Ross Stores $0.97
TGT Target $2.85

 

Wednesday (March 2)

IN THE SPOTLIGHT: DOLLAR TREE

The Chesapeake, Virginia-based company Dollar Tree is expected to report earnings of $1.78 per share in the fourth quarter, down over 16% from $2.13 per share seen in the same period a year ago. But the discount variety stores that sells items for $1 or less would post revenue growth of more than 5% to $7.13 billion.

“While supply chain disruptions and associated costs are top of mind given the unexpected magnitude of these costs in 2Q and ongoing impact in 3Q, we believe that Dollar Tree’s price-increase initiative will likely be a focal point for investors. More specifically, we think investors will look to better understand customer receptivity to these price increases, the degree to which these price increases can mitigate the aforementioned supply chain costs, and to what extent the company is utilizing higher price point items to diversify merchandising and sourcing,” noted Randal J. Konik, equity analyst at Jefferies.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE MARCH 2

TICKER COMPANY EPS FORECAST
ANF Abercrombie & Fitch $1.59
BOX Box Inc. $-0.06
PDCO Patterson Cos. $0.50
SGFY Signify Health $0.02
SPLK Splunk $-1.08
VEEV Veeva Systems $0.59

 

Thursday (March 3)

IN THE SPOTLIGHT: BROADCOM

Chipmaker and software infrastructure supplier Broadcom is expected to report earnings per share of $8.08 in the fiscal first quarter, which represents year-over-year growth of over 22% from $6.61 per share seen in the same period a year ago.

The San Jose, California-based semiconductor manufacturer would post revenue growth of nearly 14% to $7.6 billion. The company has beaten consensus earnings estimates in most of the quarters in the last two years, at least.

Broadcom (AVGO) is a compelling franchise in semis with diversified end-market exposure, product cycle momentum in wireless and networking, and market leadership. Furthermore, we take a more constructive view than investors on the company’s software strategy, particularly its purchase of Symantec,” noted Joseph Moore, equity analyst at Morgan Stanley.

“While sentiment has gradually improved, AVGO is still trading below the SOX on a P/E basis despite superior margins and FCF. We see an increase in 5G $ content, a rebound in enterprise, and reacceleration of cloud as tailwinds through 2021; and with the company’s net leverage reduced meaningfully it should be in the position to continue to execute on tuck-in deals in software.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE MARCH 3

TICKER COMPANY EPS FORECAST
BBY Best Buy $2.81
BIG Big Lots $2.19
COST Costco Wholesale $2.54
GPS Gap $-0.12
KR Kroger $0.70
WB Weibo $0.75

 

Friday (March 4)

No major earnings are scheduled for release.

Big Money Must Be Costco Members

So, what’s Big Money? Said simply, that’s when a stock goes up in price alongside chunky volumes. It’s indicative of institutions betting on the shares.

Smart money managers are always looking for the next hot stock. And Costco has many fundamental qualities that are attractive.

This sets up well for the stock going forward. But how the shares have been trading points to more upside. As I’ll show you, the Big Money has been consistent in the shares all year.

You see, fund managers are always looking to bet on the next outlier stocks…the best in class. They spend countless hours sizing up companies, reading reports, speaking to analysts…you name it. When they find a company firing on all cylinders, they pounce in a big way.

That’s why I’ve learned how critical it is to gauge Big Money demand for shares. To show you what I mean, have a look at all the big money signals COST has made the last year.

The last few weeks have seen Big Money activity, too. Each green bar signals big trading volumes as the stock ramped in price:

Source: www.mapsignals.com

In 2021, the stock has attracted 25 Big Money buy signals. Generally speaking, recent green bars could mean more upside is ahead.

Now, let’s check out technical action grabbing my attention:

  • 1-month outperformance vs. Consumer Staples Select Sector SPDR Fund (+8.6% vs. XLP)

Outperformance is important for leading stocks.

Next, it’s a good idea to check under the hood. Meaning, I want to make sure the fundamental story is strong too. As you can see, Costco has been growing sales at a double-digit rate. Take a look:

  • 3-year sales growth rate (+11.5%)
  • 3-year earnings growth rate (+16.7%)

Source: FactSet

Marrying great fundamentals with technically superior stocks is a winning recipe over the long-term.

In fact, COST has been a top-rated stock at my research firm, MAPsignals, for years. That means the stock has buy pressure, strong technicals, and growing fundamentals. We have a ranking process that showcases stocks like this on a weekly basis.

COST has a lot of qualities that are attracting Big Money. And since 2015, it’s made this list just 4 times, with its first appearance on 12/8/2015… but gaining 230.92% since. The blue bars below show the times that Costco was a top pick since 2015:

Source: www.mapsignals.com

It’s been a top stock in the consumer staples sector according to the MAPsignals process. I wouldn’t be surprised if COST makes additional appearances in the years to come. Let’s tie this all together.

The Bottom Line

The Costco rally could have further to go. Big money buying in the shares is signaling to take notice. Shares could be positioned for further upside. Given the historical gains in share price and strong fundamentals, this stock could be worth a spot in a growth-oriented portfolio.

Disclosure: the author holds long positions in COST in personal and managed accounts at the time of publication.

Learn more about the MAPsignals process here.

Disclaimer

https://mapsignals.com/contact/

 

Costco Fully Valued Ahead of Earnings

Costco Wholesale Corp. (COST) reports fiscal Q1 2022 earnings after Thursday’s closing bell, with analysts looking for a profit of $2.65 per-share on $49.75 billion in revenue. If met, earnings-per-share (EPS) will mark a 16% profit increase compared to the same quarter last year. The stock rose 3.3% in September after the company exceeded Q4 EPS guidance with a 17.5% revenue increase, but fell 7% in the next six sessions.

Black Friday Bummer

The big box retailer reported November comparative sales of 9.2%, with net sales rising 15.7% year-over-year. E-commerce growth slowed to 11.7%, held back by tough comparisons after 2020’s pandemic sales surge. Despite those results, investor sentiment is mixed after U.S. Black Friday store sales dropped $100 million compared to last year’s record of $9 billion. In addition, it was the first time the annual event generated no online spending growth.

The stock has defied gravity throughout 2021 and is now boasting an impressive 41% year-to-date return. However, rivals Walmart Inc. (WMT) and Target Corp. (TGT) have struggled in the last four months, suffering through active distribution that increases risk heading into Thursday’s report. In addition, the weekly Stochastic indicator has now flipped into a sell cycle, predicting rangebound action or lower prices into the first quarter of 2022.

Wall Street and Technical Outlook

Wall Street consensus stands at a ‘Moderate Buy’ rating based upon 17 ‘Buy’, 6 ‘Hold’, and no ‘Sell’ recommendations. Price targets currently range from a low of $423 to a Street-high $600 while the stock is set to open Thursday’s session right on top of the median $532 target. This mid-range placement indicates that Costco is fully valued at this time and will need to post blow-out quarterly results to book higher prices.

Costco cleared February 2020 resistance around 325 in August and stalled near the 400 level in November. A secondary breakout in June 2021 attracted intense buying interest, lifting the stock nearly 180 points into November’s all-time high at 560.78. A distribution wave into December has reversed bullish signals, with price action likely to carve an extended trading range, with resistance at the high and support at the 50-day moving average near 500.

Catch up on the latest price action with our new ETF performance breakdown.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Best Stocks, Crypto, and ETFs to Watch – Bitcoin, GameStop, Costco and SPY in Focus

Bitcoin got smashed over the weekend, dropping to a two-month low under 42,000 before bouncing above 49,000 ahead of the new trading week. The selloff follows ‘de-risking’ in other volatile assets, along with a flight to safety, as traders and investors speculate on fallout from the Omicron variant. The senior cryptocurrency failed a breakout above the April peak near 65,000 in November, with selling pressure since that time raising odds for a long-term double top reversal.

Speaking of de-risking, 2020 meme monster GameStop Inc. (GME) reports Q3 2021 earnings after Wednesday’s closing bell, with analysts looking for a loss of $0.52 per-share on $1.29 billion in revenue. If met, earnings-per-share (EPS) will mark a slight improvement compared to the $0.53 loss in the same quarter last year. The options market could go ballistic ahead of the report, with the most aggressive bearish bets of 2021, fueled by last week’s 23% decline in meme cousin AMC Entertainment Holdings Inc. (AMC).

Costco Wholesale Corp. (COST) has defied gravity through most of 2021, posting a 40% year-to-date return. However, big box rivals Walmart Inc. (WMT) and Target Corp. (TGT) have been under active distribution for weeks, raising odds for an aggressive sell-the-news reaction after COST reports fiscal Q1 2022 earnings on Thursday evening. Technical readings are deteriorating into the news, with weekly relative strength indicators nearing a potent sell signal.

SPDR S&P 500 Trust (SPY) reached short-term support at the 50-day moving average and breakout above the September high at 454 in Wednesday’s session. The fund bounced on Thursday but relinquished the majority of those gains on Friday, raising odds for a breakdown that could unfold as early as Sunday’s overnight session. That violation may signal additional downside into the 200-day moving average at 428, which has narrowly aligned with the October swing low.

Tesla Inc. (TSLA) had a bad week as well, dropping more than 6%, as investors dumped high growth stocks in favor of defensive plays. The selloff also marked a delayed reaction to a bearish Monday Tweet by CEO Elon Musk, in which he reiterated supply chain issues and warned “I will provide an updated product roadmap on next earnings call.” The decline has the potential to complete an Adam and Eve double top, with critical support just below the psychological 1,000 level.

Catch up on the latest price action with our new ETF performance breakdown.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Earnings Week Ahead: AutoZone, Campbell Soup, Lululemon and Broadcom in Focus

Earnings Calendar For The Week Of December 6

Monday (December 6)

Ticker Company EPS Forecast
SAIC Science Applications International $1.49
MDB MongoDB Inc -$0.38

 

Tuesday (December 7)

IN THE SPOTLIGHT: AUTOZONE

The Memphis, Tennessee-based auto parts retailer AutoZone is expected to report earnings per share of $20.78 in the fiscal first quarter, which represents year-over-year growth of about 12% from $18.61 per share seen in the same period a year ago.

The company, which is a major retailer and distributor of automotive replacement parts and accessories, is on track to beat earnings per share estimates again after having beaten it for 12 consecutive quarters. The company is expected to post revenue growth of about 6% to $3.33 billion.

The company is expected to earn $97.73 per share and generate $14.81 billion in revenue for the entire fiscal year, according to Zacks Research. These results demonstrate increases of 2.67 % and 1.22 % over last year, respectively.

“We see AutoZone (AZO) as a high-quality retailer with the ability to compound earnings/FCF growth over time. While not immune to a tougher macro backdrop (fewer miles driven), we believe AZO is best positioned through any recession given its leading exposure to the more defensive DIY segment (~80% of sales),” noted Simeon Gutman, equity analyst at Morgan Stanley.

“In addition, its DIFM growth was accelerating pre-COVID-19 and we think it can gain more share in that segment going forward. In our view, ongoing share gains coupled with solid expense management should allow AZO to overcome headwinds from less driving in the near- to medium-term. These advantages seem priced in currently.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE DECEMBER 7

Ticker Company EPS Forecast
AZO AutoZone $20.71
AHT Ashtead Group £0.62
S Sprint -$0.18
TOL Toll Brothers $2.48
CASY Casey’s General Stores $2.79
HRB H&R Block -$0.94

 

Wednesday (December 8)

Ticker Company EPS Forecast
UNFI United Natural Foods $0.58
KFY Korn Ferry International $1.37
THO Thor Industries $2.70
RH Restoration Hardware $6.62
GEF Greif $1.47
GME GameStop -$0.52
CPB Campbell Soup $0.81

 

Thursday (December 9)

IN THE SPOTLIGHT: LULULEMON ATHLETICA, BROADCOM

LULULEMON: The Vancouver-based healthy lifestyle-inspired athletic retailer is expected to report its fiscal third-quarter earnings of $1.40 per share, which represents year-over-year growth of over 20% from $1.16 per share seen in the same period a year ago.

The apparel retailer would post year-over-year sales growth of about 28% to $1.43 billion. In the last two years, the company has beaten earnings per share (EPS) estimates most of the time.

Sales are expected to be $1.4-$1.43 billion in the third quarter of fiscal 2021, representing a two-year CAGR of 24-25%. The gross margin is expected to increase 50-100bps compared to the second quarter of fiscal 2019. The company expects adjusted earnings to be between $1.33 and $1.38 per share, compared with $1.16 in the prior-year quarter and 96 cents in the third quarter of fiscal 2019, according to ZACKS Research.

Net revenues are expected to reach $6.19-$6.26 billion for fiscal 2021 compared with $5.83-$5.91 billion earlier. Earnings per share will be $7.38-$7.48 versus $6.73-$6.86 previously mentioned.

Lululemon Athletica (LULU) is a long-term topline grower, supported by compelling secular tailwinds (e.g., performance/athleisure focus), a market share gain opportunity, & credible future revenue driver (e.g., international expansion, digital growth, & product innovation/expansion into new categories). The company’s recent MIRROR acquisition offers both revenue & profitability upside, as reflected in our bull case,” noted Kimberly Greenberger, equity analyst at Morgan Stanley.

LULU dominates the NA athletic yoga apparel category due to its unique brand positioning & fashionable products. Covid accelerated consumers health & wellness focus & fashion casualization, both of which should benefit LULU.”

BROADCOM: The chipmaker and software infrastructure supplier is expected to report its fiscal fourth-quarter earnings of $7.74 per share, which represents year-over-year growth of over 21% from $6.35 per share seen in the same period a year ago. The semiconductor manufacturer would post revenue growth of nearly 14% to $7.35 billion.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE DECEMBER 9

Ticker Company EPS Forecast
SMDS Ds Smith £16.10
FIZZ National Beverage $0.50
HRL Hormel Foods $0.50
CIEN Ciena $0.86
ORCL Oracle $1.11
LULU Lululemon Athletica $1.40
AVGO Broadcom Inc $7.74
MTN Vail Resorts -$3.66
COST Costco Wholesale $2.57

 

Friday (December 10)

No major earnings are scheduled for release.

Costco Could Enter Intermediate Correction

Costco Wholesale Corp. (COST) reports Q4 2021 earnings after Thursday’s closing bell, with analysts expecting a healthy profit of $3.65 per-share on $61.45 billion in revenue. If met, earnings-per-share (EPS) will mark a 13% profit increase compared to the same quarter last year. The stock sold off more than 2% in June despite beating Q3 top and bottom line estimates, but recovered quickly, carving a series of new highs into September.

Impressive 2021 Sales and Revenue

The big box retailer picked up substantial market share during 2020 lockdowns and has retained those customers throughout 2021. Monthly sales reports during the quarter have hit the mark, most recently with August adjusted comparative sales growth (excluding gasoline and forex) of 9.1% vs. 8.0% in July. Unadjusted sales grew 14.2% vs. 12.8% in the prior month while Costco booked outstanding net sales of $15.75 billion, 16.2% higher than the $13.56 billion booked in August 2020.

Telsey Advisory Group analyst Joseph Feldman outlined his bullish thesis earlier in the quarter, insisting that Costco “should remain a share gainer, with its solid sales, high membership renewal rates (110 million total members), and square footage growth of LSD. In fiscal year 2022, Costco should continue to generate solid EPS growth, driven by a MSD comp, MSD-HSD membership fee income growth, healthy digital growth, and lapping COVID-19 related costs”.

Wall Street and Technical Outlook

Wall Street consensus has eased after a 47% six-month advance, with an ‘Overweight’ rating based upon 17 ‘Buy’, 4 ‘Overweight’, 10 ‘Hold’, and 1 ‘Underweight’ recommendation. No analysts are recommending that shareholders close positions. Price targets currently range from a low of $385 to a Street-high $525 while the stock will open Tuesday’s session about $22 below the median $475 target. Short-term upside may be limited, given this mid-range placement and recent share gains.

Costco has been an outstanding performer in the last decade, rising more than 500%. It topped out at 393.15 in November 2020 following a strong uptrend and carved a steep decline into March 2021. A strong bounce reached the prior peak in May, ahead of a June breakout that’s added more than 70 points. However, momentum has waned in recent weeks, setting off a weekly sell cycle that favors an intermediate correction and limited gains well into the fourth quarter.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Earnings Week Ahead: Lennar, Autozone, FedEx, Nike and Costco Wholesale in Focus

Earnings Calendar For The Week Of September 20

Monday (September 20)

IN THE SPOTLIGHT: LENNAR

Lennar Corp, a home construction and real estate company, is expected to report earnings per share of $3.27 in the fiscal third quarter, which represents year-over-year growth of over 54% from $2.12 per share seen in the same period a year ago.

The Miami, Florida-based company would post year-over-year revenue growth of nearly 24% to around $7.3 billion. For four quarters in a row, the company has exceeded expectations on earnings per share.

“Shares of Lennar have outperformed the industry so far this year. The company is benefiting from effective cost control and focus on making its homebuilding platform more efficient, which in turn resulted in higher operating leverage. Higher demand for new homes backed by declining mortgage rates and low inventory levels bodes well. Focus on the lighter land strategy to boost free cash flow will bolster the balance sheet and thereby drive returns,” noted Analysts at ZACKS Research.

“Moreover, it has provided strong fiscal Q3 homebuilding gross margin guidance, suggesting 420 basis points (bps) increase at mid-point. Also, it has lifted average selling price and margin expectation for fiscal 2021, indicating 6% and 400bps year-over-year growth. However, higher land, labor and material costs are concerning. This may exert pressure on the company’s upcoming quarters as well.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE SEPTEMBER 20

Ticker Company EPS Forecast
LEN Lennar $3.27
HRB H&R Block -$0.34

 

Tuesday (September 21)

IN THE SPOTLIGHT: AUTOZONE, FEDEX

AUTOZONE: The Memphis, Tennessee-based auto parts retailer is expected to report its fiscal fourth-quarter earnings of $29.71 per share, which represents a year-over-year decline of about 4% from $30.93 per share seen in the same period a year ago.

Autozone (AZO) is our top pick in DIY Auto. We see it as a high-quality retailer with the ability to compound earnings/FCF growth over time. While not immune to a tougher macro backdrop (fewer miles driven), we believe AZO is best positioned through any recession given its leading exposure to the more defensive DIY segment (~80% of sales). In addition, its DIFM growth was accelerating pre-COVID and we think it can gain more share in that segment going forward. In our view, ongoing share gains coupled with solid expense management should allow AZO to overcome headwinds from less driving in the near- to medium-term. These advantages seem priced in currently.”

FEDEX: The Memphis, Tennessee-based multinational delivery services company is expected to report its fiscal first-quarter earnings of $5.00 per share, which represents year-over-year growth of about 3% from $4.87 per share seen in the same period a year ago.

The delivery firm would post revenue growth of about 13% to $21.8 billion. In the last four quarters, on average, FedEx has beaten earnings estimates over 28%.

“August quarter remained strong, although we are seeing some delays in shipments, which we expect management to address,” noted Helane Becker, equity analyst at Cowen.

“We are approaching the peak shipping season and expect to see ~50K new hires to handle what is likely to be record demand. Looking ahead, FedEx (FDX) should finally finish the TNT integration; European operations should show that.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE SEPTEMBER 21

Ticker Company EPS Forecast
AZO AutoZone $29.71
FDX FedEx $4.94
ADBE Adobe Systems $3.01
KGF Kingfisher £12.20
CBRL Cracker Barrel Old Country Store $2.33
NEOG Neogen $0.16

 

Wednesday (September 22)

Ticker Company EPS Forecast
KBH Kb Home $1.61
FUL HB Fuller $0.79
BBBY Bed Bath & Beyond Inc. $0.52
UNFI United Natural Foods $0.80
GIS General Mills $0.89

 

Thursday (September 23)

IN THE SPOTLIGHT: NIKE, COSTCO WHOLESALE

NIKE: The world’s largest athletic footwear and apparel seller is expected to report its fiscal first-quarter earnings of $1.12 per share, which represents year-over-year growth of about 18%, up from $0.95 per share seen in the same period a year ago.

The Beaverton, Oregon-based footwear retailer would post year-over-year revenue growth of over 18% to $12.6 billion.

“Investors are focused on the Vietnam factory closures impact on FY revenue guidance. Our analysis & mgmt guidance conservatism suggests minimal risk. But high valuation requires beat & raise quarters – stock price pullback possible & we’re buyers on any weakness. Reiterate Overweight; raise price target to $221,” noted Kimberly Greenberger, equity analyst at Morgan Stanley.

Nike (NKE) trades at the high end of its historical valuation range, & investors expect quarterly beats & guidance raises. Unchanged or lowered FY guidance on temporary, Vietnam-driven headwinds could result in a stock pullback. We would be buyers on any potential weakness.”

COSTCO WHOLESALE: The world’s fifth-largest retailer is expected to report its fiscal fourth-quarter earnings of $3.56 per share, which represents year-over-year growth of over 1.4% from $3.51 per share seen in the same period a year ago. The Fridley, Minnesota-based medical company would post revenue growth of about 18% to around $63 billion.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE SEPTEMBER 23

Ticker Company EPS Forecast
ACN Accenture $2.18
DRI Darden Restaurants $1.64
NKE Nike $1.12
COST Costco Wholesale $3.56
MTN Vail Resorts -$3.46
PRGS Progress Software $0.82

 

Friday (September 24)

Ticker Company EPS Forecast
CCL Carnival -$1.43
CUK Carnival -$1.45
CCL Carnival -£1.45

 

Costco Shares Attract Big Money

And it could be setting up for more highs soon. One likely reason is due to Big Money lifting the stock.

So, what’s Big Money? That’s when a stock goes up in price alongside chunky volumes. It’s indicative of institutions betting on the shares.

Smart money managers are always looking for the next hot stock. And Costco has many fundamental qualities that are attractive.

This sets up well for the stock going forward. But how the stock is trading points to more upside. As I’ll show you, the Big Money has been consistent in the shares the last year.

You see, fund managers are always looking to bet on the next outlier stocks…the best in class. They spend countless hours sizing up companies, reading reports, speaking to analysts…you name it. When they find a company firing on all cylinders, they pounce in a big way.

That’s why I’ve learned how critical it is to gauge Big Money demand for shares. To show you what I mean, have a look at all of the big money signals COST has made the last year.

The last few days has seen Big Money activity, too. Each green bar signals big trading volumes as the stock ramped in price. Red signals are showing big selling in the shares:

Chart, histogram

Description automatically generated

Source: www.mapsignals.com

In 2021, the stock has steadily gained. Year to date, COST made 7 of these rare green signals. These came after a big selloff earlier this year when growth stocks were under pressure. Generally speaking, recent green bars could mean more upside is ahead.

Now, let’s check out technical action grabbing my attention:

  • YTD outperformance vs. staples ETF (+4.12% vs. XLP)

Outperformance is huge for leading stocks.

Next, it’s a good idea to check under the hood. Meaning, I want to make sure the fundamental story is strong too. As you can see, Costco has been growing revenues and earnings rapidly. Take a look:

  • 3-year sales growth rate (+8.93%)
  • 3-year earnings growth rate (+14.04%)

Source: FactSet

Marrying great fundamentals with technically superior stocks is a winning recipe over the long-term.

In fact, Costco has been a top-rated stock at my research firm, MAPsignals, dozens of times the last few years. That means the stock has buy pressure, strong technicals, and growing fundamentals. We have a ranking process that showcases stocks like this on a weekly basis.

COST has been a Big Money favorite since 1991 (live and backtested data). And since it last appeared on this report back on 1/12/2016, it’s up 199%. The blue bars below are the times that Costco was a top pick:

Chart, histogram

Description automatically generated

Source: www.mapsignals.com

I wouldn’t be surprised if COST makes additional appearances in the years to come. Let’s tie this all together.

Costco continues to fire on all cylinders technically alongside growing sales and earnings. I like the long-term story of the stock.

The Bottom Line

The Costco rally could have further to go. Big money buying in the shares is signaling to take notice. Shares could be positioned for further upside. Given the historical gains in share price and strong fundamentals, this stock could be worth a spot in a growth-oriented portfolio.

Disclosure: the author holds long positions in COST in personal and managed accounts at the time of publication.

Learn more about the MAPsignals process here.

Disclaimer

https://mapsignals.com/contact/

For a look at all of today’s economic events, check out our economic calendar.

Costco Losing Altitude Despite Strong Quarter

Costco Wholesale Corp. (COST) sold off more than 2% on Friday despite beating Q3 2021 top and bottom line estimates by healthy margins. The big box retailer earned $2.75-per-share during the quarter, $0.47 better than expectations, while revenue rose a healthy 21.8% year-over-year to $44.38 billion, more than $500 million higher than consensus. U.S. sales rose 15.2% while e-commerce sales eased off the torrid 2020 pace, rising a still-impressive 38.2%.

Weak Buying Interest

The stock is finally trading in the green for 2021 following a steep first quarter decline that shed nearly 20%. A broad-based rotation out of the COVID-19 beneficiaries and into recovery plays dampened buying interest after last year’s impressive 29% return and it’s been slow to return.  Even so, Costco was trading at a 35.5 forward price-to-earnings (P/E) ratio before the report, marking a premium to rivals Walmart Corp. (WMT) and Target Corp. (TGT).

Telsey Advisory Group analyst Joseph Feldman raised his target to $415 on Friday, noting “Costco should remain a share gainer, with its solid sales, high membership renewal rates (110MM total members), and square footage growth of LSD. In FY22, Costco should continue to generate solid EPS growth, driven by a MSD comp, MSD-HSD membership fee income growth, healthy digital growth, and lapping COVID-19 related costs. We maintain our Outperform rating.”

Wall Street and Technical Outlook

Wall Street consensus stands at an ‘Overweight’ rating after last year’s strong performance, underpinned by 19 ‘Buy’, 4 ‘Overweight’, 10 ‘Hold’, and 2 ‘Underweight’ recommendations. Price targets currently range from a low of $249 to a Street-high $415 while the stock closed Friday’s session more than $35 below the median $416 target. This low placement highlights Main Street discomfort with the higher-than-historical valuation.

Costco has been a superior performer for more than a decade, posting a long series of new highs. It broke out above February 2020 resistance at 325 in July and entered a healthy uptrend that posted an all-time high at 393.15 in November. The subsequent decline found support at 307 in March while a V-shaped recovery into May stalled four points below the 2020 peak. Weak accumulation during the uptick has failed to reach prior highs, setting the stage for mixed two-sided price action into the second half.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Costco Wholesale Sales Growth Stands Solid; Target Price $445 in Best Case

Costco Wholesale Corporation, which operates a chain of membership-only big-box retail stores, reported a high-than-expected profit in the fiscal third quarter, prompting several analysts to raise their one-year price targets.

The leading warehouse club said its net sales for the quarter jumped 21.7% to $44.38 billion, from $36.45 billion last year. Net sales for the first 36 weeks increased 17.7% to $130.61 billion, from $110.94 billion last year.

Costco’s net income attributable climbed to $1.22 billion, or $2.75 per share, up from $838 million, or $1.89 per share a year ago. That was higher than the Wall Street consensus estimates of $2.31 per share. The company’s total revenue jumped 21.5% to $45.28 billion, beating the market expectations of $43.64 billion.

Costco Wholesale shares rose over 3% so far this year. The stock closed 0.5% higher at $387.5 on Thursday.

Analyst Comments

“We plan to lift our $332 per share valuation of wide-moat Costco by a mid-single-digit percentage after it posted strong third-quarter (ended May 9) earnings. Its 21% revenue growth impressed considering the chain lapped the early days of the pandemic (which included significant customer stock-up activity), but we mostly attribute the results to transitory factors,” noted Zain Akbari, equity analyst at Morningstar.

“So, our long-term forecast still calls for mid-single-digit percentage sales growth and 3%-4% adjusted operating margins. We suggest investors seek a more attractive entry price, particularly considering elevated uncertainty as the customer habits normalize,”

Costco Wholesale Stock Price Forecast

Twenty-two analysts who offered stock ratings for Costco Wholesale in the last three months forecast the average price in 12 months of $400.60 with a high forecast of $445.00 and a low forecast of $325.00.

The average price target represents a 3.38% increase from the last price of $387.50. Of those 22 analysts, 17 rated “Buy”, five rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the stock price forecast of $410 with a high of $520 under a bull scenario and $270 under the worst-case scenario. The firm gave an “Overweight” rating on the apparel retail company’s stock.

COST’s results have consistently been among the best in Retail. Over the past decade, COST has delivered ~6% comps and ~10% EBIT growth on average. It is rare to find a business with COST’s solid comp/membership growth, while relative e-commerce insulation differentiates its value proposition from other retailers,” noted Simeon Gutman, equity analyst at Morgan Stanley.

“We are Overweight even as the stock trades at an elevated valuation given COST’s scarcity value, safety, and scale. In the near-term, we expect incremental sales uplifts from COVID-19 disruption, and earnings power looks stronger despite COVID-19 expenses.”

Several other analysts have also updated their stock outlook. Cowen and company raised the target price to $440 from $410. RBC lifted the target price to $453 from $425. CFRA upped the target price by $55 to $375. Raymond James increased the target price to $415 from $410. JPMorgan raised the target price to $420 from $410.

Check out FX Empire’s earnings calendar

Best Dividend Stocks June 2021

In my experience, great dividend stocks have a few characteristics: strong fundamentals, increasing dividend distributions over time, and bullish trading activity in the shares.

The hallmark way I go about finding the best dividend stocks…the outliers, is by looking for quiet Big Money trading activity. Oftentimes, that can be institutional activity. I’ll go over why following the Big Money is so important in a bit. But, the 5 stocks I see as long-term dividend growth candidates are ABT, COST, ADI, MCD, & NKE.

Over decades, I’ve learned that the true tell on great stocks is that big money consistently finds its way into the best companies out there… especially dividend paying stocks. Some of the biggest returns ever have come from holding stocks for many years and reinvesting dividends.

I want the odds on my side when looking for the highest quality dividend stocks…and I own many of them.

So, let’s get into it.

Up first is Abbott Laboratories, Inc. (ABT), which is a seller of health care products globally. Their product lines include pharmaceuticals, nutrition, diagnostics, and medical devices.

Let’s first start with the technical picture.

When deciding on a strong candidate for long-term dividend growth, I look for stocks seeing a pullback:

  • 1 month performance (-3.41%)
  • Historical Big Money buy signals

Below are the Big Money signals Abbott Labs has made since 2015. Green bars are showing that ABT was seeing big buy activity according to MAPsignals. Typically, the more Big Money signals, the stronger the stock:

Source: MAPsignals, End of day data sourced from Tiingo.com

On top of technicals, when deciding on the best dividend stock, you should look under the hood to see if the fundamental picture supports a long-term investment. As you can see, ABT has a strong dividend history:

  • 3-year dividend growth rate (+10.8%)
  • Current dividend per share = .45
  • Forward yield = 1.54%
  • 3-year earnings growth rate (+158.04%)

Next up is Costco Wholesale Corp. (COST), which operates membership warehouses in many countries. They offer branded and off-brand retail products.

When deciding on a strong candidate for long-term dividend growth, it’s a good idea to look for many years of dividend increases.

Now let’s look at recent performance:

  • 1 month performance (+4.80%)
  • Historical big money signals

Below are the big money signals that Costco has made since 2015. I expect more buy signals in the years to come.

Source: MAPsignals, End of day data sourced from Tiingo.com

On top of technicals, when deciding on the best dividend stock, you should look under the hood to see if the fundamental picture supports a long-term investment. As you can see, Costco has a nice dividend history. Their earnings growth has been stellar as well:

  • 3-year dividend growth rate (+12.4%)
  • Current dividend per share = .79
  • Forward yield = .82%
  • 3-year earnings growth rate (+14.04%)

Next, I’m looking at Analog Devices, Inc. (ADI), which is a leading semiconductor company. They have a solid dividend history.

When deciding on a strong candidate for long-term dividend growth, recent performance in the shares is important:

  • 1 month performance (+1.92%)
  • Recent Big Money signals

Below are the big money signals that Analog Devices has made since 2015. It’s clear the stock has been in a nice uptrend:

Source: MAPsignals, End of day data sourced from Tiingo.com

On top of technicals, when deciding on the best dividend stock, you should look under the hood to see if the fundamental picture supports a long-term investment. As you can see, ADI has a strong dividend history:

  • 3-year dividend growth rate (+10.7%)
  • Current dividend per share = .69
  • Forward yield = 1.69%
  • 3-year earnings growth rate (+24.62%)

Next, I’m looking at McDonald’s Corp. (MCD), which is a global fast-food franchise company. They operate over 39,000 restaurants globally.

When deciding on a strong candidate for long-term dividend growth, recent muted performance is not a bad thing:

  • 1 month performance (-.07%)
  • Recent Big Money signals

Below are the Big Money signals that McDonald’s has made since 2015.

Source: MAPsignals, End of day data sourced from Tiingo.com

On top of technicals, when deciding on the best dividend stock, let’s check up on the fundamentals. As you can see, McDonald’s has a strong dividend history.

  • 3-year dividend growth rate (+9.6%)
  • Current dividend per share = 1.29
  • Forward yield = 2.2%
  • 3-year earnings growth rate (+.9%)

Lastly, I’m looking at NIKE, Inc. (NKE), which is a leading athletic footwear and apparel company.

When deciding on a strong candidate for long-term dividend growth, I like to look for recent leaders:

  • 1 month performance (+2.07%)
  • Historical Big Money signals

Below are the Big Money signals that NIKE has made since 2015.

Source: MAPsignals, End of day data sourced from Tiingo.com

On top of technicals, when deciding on the best dividend stock, you gotta see if the fundamental picture supports a long-term investment. NIKE has been a steady grower:

  • 3-year dividend growth rate (+10.9%)
  • Current dividend per share = .275
  • Forward yield = .81%
  • 3-year earnings growth rate (+8.22%)

The Bottom Line

ABT, COST, ADI, MCD, & NKE represent solid dividend choices. Given the strong historical dividend growth and Big Money signals, these stocks could be worth an extra look for a dividend investor.

Disclosure: the author holds long positions in personal and managed accounts in COST and long positions in managed accounts in ADI & NKE. He holds no positions in ABT & MCD at the time of publication.

To learn more about the MAPsignals process, click here: www.mapsignals.com

Disclaimer

https://mapsignals.com/contact/

For a look at all of today’s economic events, check out our economic calendar.

Earnings to Watch Next Week: AutoZone, Nvidia, Medtronic and Costco Wholesale in Focus

Earnings Calendar For The Week Of May 24

Monday (May 24)

Ticker Company EPS Forecast
NDSN Nordson $1.64

Tuesday (May 25)

IN THE SPOTLIGHT: AUTOZONE

The Memphis, Tennessee-based auto parts retailer is expected to report its fiscal third-quarter earnings of $20.02 per share, which represents year-over-year growth of about 39% from $14.39 per share seen in the same period a year ago.

The United States’ leading retailer and a leading distributor of automotive replacement parts and accessories would post revenue growth of 17% to $3.26 billion. In the last four quarters, on average, the company has beaten earnings estimates over 12%.

AutoZone (AZO) could comp ~30% in F’Q3 with a boost from the stimulus, and a flat comp is possible in F’Q4 on a tougher compare. However, these beats may not fully flow through to F’22. Risk/reward looks positive but less favorable after the stock’s recent run. Stay ‘Overweight’ with a $1,640 price target,” noted Simeon Gutman, equity analyst at Morgan Stanley.

AZO is our top pick in DIY Auto. We see it as a high-quality retailer with the ability to compound earnings/FCF growth over time. While not immune to a tougher macro backdrop (fewer miles driven), we believe AZO is best positioned through any recession given its leading exposure to the more defensive DIY segment (~80% of sales). In addition, its DIFM growth was accelerating pre-COVID and we think it can gain more share in that segment going forward. In our view, ongoing share gains coupled with solid expense management should allow AZO to overcome headwinds from less driving in the near- to medium-term.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE MAY 25

Ticker Company EPS Forecast
SHB Shaftesbury £0.64
VSAT Viasat $0.22
CBRL Cracker Barrel Old Country Store $0.27
AZO AutoZone $20.02
HTHT Huazhu Group Limited -$1.61
DY Dycom Industries $0.06
URBN Urban Outfitters $0.17
HEI Heico $0.48
TOL Toll Brothers $0.79
A Agilent $0.83
INTU Intuit $6.52
JWN Nordstrom -$0.58
VNET 21Vianet -$0.43
BYG Big Yellow £22.76

Wednesday (May 26)

IN THE SPOTLIGHT: NVIDIA

The Santa Clara, California- based multinational technology company is expected to report its first-quarter earnings of $3.28 per share, which represents year-over-year growth of over 80% from $1.80 per share seen in the same period a year ago.

In the last four consecutive quarters, on average, the company has delivered an earnings surprise of over 10%. The company, which designs graphics processing units for the gaming and professional markets, as well as system on a chip unit for the mobile computing and automotive market would post year-over-year revenue growth of over 70% to $5.4 billion.

“For the first quarter of fiscal 2022, NVIDIA anticipates revenues of $5.3 billion (+/-2%). Non-GAAP gross margin is projected at 66% (+/-50 bps). Non-GAAP operating expenses are estimated to be $1.20 billion. Capital expenditures are expected to be approximately $300-$325 million,” noted equity analysts at ZACKS Research.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE MAY 26

Ticker Company EPS Forecast
VAR Varian Medical Systems $1.10
NVDA Nvidia $3.28
BMO Bank Of Montreal USA $2.17
CPRI Capri Holdings Ltd $0.01
ANF Abercrombie & Fitch -$0.41
DKS Dick’s Sporting Goods $1.16
UHAL Amerco $5.07
WDAY Workday $0.73
SNOW Intrawest Resorts -$0.16
AEO American Eagle Outfitters $0.47
DXC DXC Technology Co $0.70
LI Li Auto -$0.14
WSM Williams Sonoma $1.72

Thursday (May 27)

IN THE SPOTLIGHT: MEDTRONIC, COSTCO WHOLESALE

MEDTRONIC: An American Irish-domiciled medical device company is expected to report its fiscal fourth-quarter earnings of $1.42 per share, which represents year-over-year growth of over 140% from $0.58 per share seen in the same period a year ago.

In the last four consecutive quarters, on average, the company has delivered an earnings surprise of over 44%. The Fridley, Minnesota-based medical company would post year-over-year revenue growth of over 35% to $8.14 billion.

“Peer results and commentary suggest ~33-34% organic growth (the upper end of mgmt guidance) is achievable, and we expect FY22 guidance in-line with Cns with room for raises. We continue to see valuation as attractive and Risk/Reward positive into FY22 recovery,” noted Cecilia Furlong, equity analyst at Morgan Stanley.

Medtronic is well aligned with our 2021 pro-recovery thesis, and we see sustainable 5%+ organic growth driven by the company’s ~5% WAMGR and supported by pipeline product launches & tuck-in M&A contributions. CEO Geoff Martha has committed to initiatives to smooth bulk purchasing and deliver more consistent results, and redeploy $450mn annual OpEx savings toward innovation & product reinvestment.”

COSTCO WHOLESALE: The world’s fifth-largest retailer is expected to report its fiscal third-quarter earnings of $2.31 per share, which represents year-over-year growth of over 20% from $1.89 per share seen in the same period a year ago.

The Fridley, Minnesota-based medical company would post revenue of $43.6 billion.

COST’s results have consistently been among the best in Retail. Over the past decade, COST has delivered ~6% comps and ~10% EBIT growth on average. It is rare to find a business with COST’s solid comp/membership growth, while relative e-commerce insulation differentiates its value proposition from other retailers,” noted Simeon Gutman, equity analyst at Morgan Stanley.

“We are Overweight even as the stock trades at an elevated valuation given COST’s scarcity value, safety, and scale. In the near-term, we expect incremental sales uplifts from COVID-19 disruption, and earnings power looks stronger despite COVID-19 expenses.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE MAY 27

Ticker Company EPS Forecast
EGFEY Eurobank Ergasias S.A. ADR $0.01
SAFM Sanderson Farms $2.44
DG Dollar General $2.13
ADSK Autodesk $0.94
CM Canadian Imperial Bank Of Commerce USA $2.49
DLTR Dollar Tree $1.39
TD Toronto-Dominion Bank $1.39
RY Royal Bank Of Canada $2.06
MDT Medtronic $1.42
BBY Best Buy $1.34
BURL Burlington Stores $0.80
ULTA Ulta Salon Cosmetics Fragrance $1.93
CRM Salesforce.com $0.88
VMW VMware $1.58
HPQ HP $0.88
BOX BOX $0.17
PLAN Progressive Planet -$0.09
VEEV Veeva Systems $0.78
GPS Gap -$0.06
COST Costco Wholesale $2.31
ASND Ascendant Resources -$1.83
YY YY -$0.06

Friday (May 28)

Ticker Company EPS Forecast
BIG Big Lots $1.67
For a look at all of today’s economic events, check out our economic calendar.

Costco Testing Key Resistance Level

Costco Wholesale Corp. (COST) is pressing against a key resistance level in Monday’s pre-market in reaction to bullish analyst commentary. The stock is still in the red for 2021 after posting a 28% return in 2020, underpinned by its commanding retail position during the COVID-19 pandemic. Taken together with 2019’s 36% return, the underperformance isn’t usual, given the market’s classic warning that “the big the move, the broader the base”.

Post-Pandemic Economic Surge

Big box store sentiment has deteriorated this year, with rival Walmart Inc. (WMT) also posting a negative year-to-date return. Despite investor reluctance, Costco is perfectly positioned to benefit from the post-pandemic economic surge in the United States and other parts of the world, given its massive footprint in North America, Asia, Australia, and Europe. It’s also trading close enough to the 2020 high to potentially support an advance toward the 500 level.

Telsey Advisory Group analyst Joseph Feldman raised his target to $375 on Monday, noting “Costco should remain a share gainer, with its solid sales, high membership renewal rates, and square footage growth of LSD. Costco should continue to generate solid EPS growth, driven by a MSD-DD comp, MSD-HSD membership fee income growth, healthy digital growth, and lapping COVID-19 related costs. We maintain our ‘Outperform’ rating, applying a P/E multiple of ~35x to our new FY22 EPS estimate of $11.15.”

Wall Street and Technical Outlook

Wall Street consensus also stands at an ‘Overweight’ rating, based upon 19 ‘Buy’, 4 ‘Overweight’, and 10 ‘Hold’ recommendations. No analysts are recommending that shareholders close positions and move to the sidelines. Price targets currently range from a low of $325 to a Street-high $415 while the stock is set to open Monday’s session more than $25 below the median $400 target. The Q3 2021 earnings report on May 27 could lift these targets.

Costco rallied above the February 2020 high at 325 in July and took off in a strong uptrend that posted an all-time high at 393.15 in November. It sold off more than 80 points into March and bounced strongly, grinding out a straight line recovery that stalled at the .786 Fibonacci retracement level at 375 about two weeks ago. A rally above this harmonic barrier should support a rapid advance into the 2021 peak near 400, setting off a potential breakout attempt.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Costco – The Stock Is Sending A Warning Message. Part 2.

Summary

  • Costco’s price pattern is closely related to the business cycle.
  • Costco outperforms the market when business slows down.
  • Costco has declined enough to make it attractive again.

As shown in my article of 12/15/2020 – Costco: A Great Defensive Play, The Issue Is Timing – Costco has distinct pattern closely tied to the business cycle.

The price action of Costco raises two questions. Is Costo likely to outperform the market? If so, what is its price action telling us about the future of the business cycle?

The importance of knowing where we are in the business cycle has major implications on what type of stocks should be in a portfolio.

Source: The Peter Dag Portfolio Strategy and Management

There are two crucial turning points of the business cycle. The first one is when business transitions from Phase 2 to Phase 3. The second point is when the business cycle moves from Phase 4 to Phase 1. Both points signal important changes in price performance of the major market sectors as discussed in detail here.

In Phase 2 of the business cycle business is facing strong demand and needs to replenish inventories to meet sales. The increased production is achieved by buying more raw materials, hiring more people, and increasing borrowing to expand and improve productive capacity.

The outcome of these decisions is higher commodity prices, rising wages, and higher interest rates. The combination of these factors is transmitted to the consumer as higher inflation.

In this phase of the business cycle commodity-sensitive stocks, industrials, energy, and financial stocks easily outperform the market.

The reason for this scenario to come to an end is rising interest rates and inflation have a negative impact on consumers’ spending power. The outcome is slower growth in demand resulting in unwanted inventory accumulation.

There is a point when business finally recognizes the economic landscape has changed and inventories need to be cut by reducing production.

The implication is buying raw materials needs to be curtailed, the workweek needs to be cut, and borrowing must also be reduced. These decisions will cause lower commodity prices, slower growth in wages, and lower interest rates. This is the time the business cycle transitions into Phase 3.

Beginning in Phase 3, sectors outperforming the market are utilities, staples, real estate, and bonds.

The current position of the business cycle is in Phase 2. The recent sharp rise in inflation, commodity prices, and interest rates suggests we are close to the Phase2-Phase 3 turning point.

The price pattern of Costco compared to the S&P 500 is particularly telling because it might give further information on the position of the business cycle.

COST/SPY

AND 200 DMA

SPREAD FROM 200DMA

Source: StockCharts.com, The Peter Dag Portfolio Strategy and Management

The above chart shows two panels. The graphs in the above panel represent the ratio between COST and SPY. The second graph is its 200-day moving average. The graphs rise when COST is outperforming SPY. The graphs decline when COST underperforms SPY. Investors are going to outperform the market if they invest in COST when the graphs rise.

The bottom panel shows the spread between the ratio COST/SPY and its 200-day moving average. The resulting pattern is unique and quite interesting.

The first feature is the spread has now reached “oversold” levels (red horizontal line), signaling the beginning of a period when COST outperforms the market.

BUSINESS CYCLE INDICATOR

SPREAD FROM 200DMA

Source: StockCharts.com, The Peter Dag Portfolio Strategy and Management

The second intriguing feature of the graphs is the spread is closely related to the business cycle as shown by the above graph. The spread between COST/SPY and its 200-day moving average is shown in the upper panel.

The lower panel shows our business cycle indicator updated in each issue of The Peter Dag Portfolio Strategy and Management available at www.peterdag.com. An exclusive complimentary free subscription is available to the readers of this article.

The interesting feature of the chart is the bottoms of the spread coincides with a peak of the business cycle. A peak of the spreads takes place when the business cycle bottoms.

The message is, and this should not be a surprise to the readers of the article published here, COST outperforms the market when the economy slows down.

Key takeaways

The transition of the business cycle from Phase 2 to Phase 3 signals the need to rebalance the investment portfolio.

The sharp increase in inflation, interest rates, and commodities we have been experiencing suggests we are close to the Phase 2-Phase 3 turning point of the business cycle.

The ratio COST/SPY has reached oversold conditions, coinciding in the past with a peak of the business cycle. These oversold conditions suggest Costco will continue to outperform the market.

The strength of Costo compared to the market may suggest investors are beginning to position their portfolios for the Phase 2-Phase 3 turning point of the business cycle.

Costco Wholesale Misses Earnings Estimates; Analysts Cut Target Price

Costco Wholesale Corporation, which operates a chain of membership-only big-box retail stores, reported a lower-than-expected profit in the second quarter, prompting several analysts to lower their one-year price targets.

The leading warehouse club reported net income for the quarter of $951 million, or $2.14 per diluted share, which includes $246 million pretax, or $0.41 per diluted share, in costs incurred primarily from COVID-19 premium wages. That was below the market consensus estimates of $2.45.

COST is positioned to comp the comp in the quarters ahead, and we expect will maintain a significant share. Compares getting challenging, but stronger traffic, re-opening driving fuel & other categories should support robust comps. Renewal returned to all-time high of 91.0% as shoppers are satisfied and loyal. We view curbside pickup pilot as a long-term positive,” said Oliver Chen, equity analyst at Cowen and Company.

Net sales for the quarter increased 14.7%, to $43.89 billion, from $38.26 billion last year. Net sales for the first 24 weeks increased 15.8%, to $86.23 billion, from $74.49 billion last year.

Costco Wholesale shares, which surged over 30% in 2020, traded about 3% lower at $311.08 on Friday.

“Our $332 per share valuation of wide-moat Costco should not change much after it announced second-quarter earnings. Its sales growth outpaced our target (12.9% adjusted comparable expansion across the company versus our 12.0% mark), but we expected cost leverage on the heightened revenue that did not materialize (25 basis points of operating margin degradation, to 3.0%, rather than our forecast for 25 basis points of improvement),” said Zain Akbari, equity analyst at Morningstar.

“As the double-digit sales growth is attributable to the pandemic and the margin shortfall to freight and fuel pressures we see as transitory, we continue to expect mid-single-digit percentage sales growth and 3%-4% operating margins over the next 10 years. We suggest investors await a greater margin of safety, as Costco faces an uncertain normalize action of spending habits once the pandemic ebbs.”

Costco Wholesale Stock Price Forecast

Eighteen analysts who offered stock ratings for Costco Wholesale in the last three months forecast the average price in 12 months of $379.44 with a high forecast of $420.00 and a low forecast of $325.00.

The average price target represents a 21.81% increase from the last price of $311.49. Of those 18 analysts, 12 rated “Buy”, six rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $410 with a high of $520 under a bull scenario and $270 under the worst-case scenario. The firm gave an “Overweight” rating on the apparel retail company’s stock.

“Healthy underlying Q2 results, but tough compares are ahead. SG&A leverage (as COVID costs are lapped) should offset gross margin pressure in F’Q3/Q4. We like COST as a longer-term holding – especially as the multiple has come in – but stock may tread water until visibility on COVID laps improves,” said Simeon Gutman, equity analyst at Morgan Stanley.

Several other analysts have also updated their stock outlook. UBS cuts target price to $395 from $415. Oppenheimer cuts target price to $350 from $400. Stifel cuts target price to $370 from $395. BMO cuts target price to $410 from $430. Deutsche bank cuts target price to $344 from $347.

Moreover, Citigroup cuts price target to $360 from $380. Telsey Advisory Group cuts price target to $375 from $430. JP Morgan cuts target price to $369 from $411. D.A. Davidson cuts price target to $325 from $390. Jefferies cuts price target to $405 from $435.

Analyst Comments

COST’s results have consistently been among the best in Retail. Over the past decade, COST has delivered 6% comps and 10% EBIT growth on average. It is rare to find a business with COST’s solid comp/membership growth, while relative e-commerce insulation differentiates its value proposition from other retailers,” Morgan Stanley’s Gutman added.

“We are Overweight even as the stock trades at an elevated valuation given COST’s scarcity value, safety, and scale. In the near-term, we expect incremental sales uplifts from COVID-19 disruption, and earnings power looks stronger despite COVID-19 expenses,” said Morgan Stanley’s Greenberger added.”

Check out FX Empire’s earnings calendar

Three Top Earnings Plays This Week

Major benchmarks sold off last week in reaction to wild action in the normally sedate bond market. Bonds recovered a good portion of weekly losses on Friday but broad volatility took its toll, dropping the SP-500 and Nasdaq-100 to weekly lows. Many popular names entered corrections during the rout, predicting weakness well into the second quarter. Expect the new week to start with bears pressing their bets and attempting to push prices to even lower levels.

Zoom Video Communication Inc. (ZM) steps to the earnings plate on Monday, with the stock struggling after shareholders picked up stakes and moved on to COVID recovery plays. Big box retailers highlight the week’s other big releases, led by Target Inc. (TGT) on Tuesday and Costco Wholesale Corp. (COST) on Thursday. COST has entered a correction after posting strong 2020 returns while TGT is caught in a trading range near January’s all-time high.

Target

Wall Street expects Target to post a profit of $2.54 per-share on $27.4 billion in revenue. If met, earnings-per-share (EPS) will mark an impressive 50% profit increase compared to the same quarter last year. The company consistently beat estimates in 2020, forcing analysts to raise price targets several times. The stock has now pulled back to support at the 50-day moving average and is perfectly positioned for a multiday bounce in reaction to another strong quarter.

Costco

Costco consensus predicts earnings of $2.31 per-share on $42.7 billion in revenue. If met, EPS will mark a 10% profit increase compared to the same quarter last year. A strong uptrend stalled above 380 in October, yielding two slightly higher highs, followed by a head and shoulders breakdown in January. The stock is now trading below the 200-day moving average for the first time since April 2020 and is rapidly approaching the H&S measured move target near 320.

Zoom Video Communications

Zoom will beat earnings posted in the same quarter last year but it won’t mean much because the period doesn’t include the pandemic. The stock has lost its luster since Pfizer Inc. (PFE) vaccine results triggered a massive rotation out of COVID beneficiaries and into recovery plays. The company has released new products to an attempt to diversify its revenue stream but is still working off massively overbought technical readings in reaction to its historic rally.

For a look at all of this week’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.