20160712-高盛-Portfolio_Manager_Action_Alert_Top_25_Tactical_Trades_for_Earnings_Season_17页_289kb

Portfolio Manager Action Alert Summary

Core Content

This document provides a comprehensive overview of the top 25 tactical trades for the upcoming earnings season, based on Goldman Sachs' research and analysis of market trends and company-specific fundamentals. The focus is on identifying stocks with the highest potential for earnings revisions, either upward or downward, and the associated options strategies that could be profitable.

Main Points

Earnings Volatility and Options Strategy

• Earnings-day volatility is significantly higher than average daily moves, with S&P 500 stocks moving ±3.5% on earnings days compared to ±1.1% on average days.
• Implied earnings-day moves have decreased slightly from ±5.5% to ±5.1% for this quarter, but remain above the average realized move of ±3.5%.
• Call buying has historically been profitable for earnings events, with a 5% return on premium for straddles and calls in the last quarter.
• Put skew is unusually high, indicating investor caution and a higher likelihood of downside volatility.

Sector-Specific Insights

• Earnings reports are concentrated in certain sectors early in the earnings season, notably Financials and Industrials.
• Technology and Discretionary sectors have shown the highest earnings-day volatility relative to average daily moves.
• Options term structure suggests that Financials (XLF) have an inverted term structure, while Industrials (XLI) and Information Technology (XLK) have more attractive short-term options.

Top 25 Out-of-Consensus Opportunities

The document outlines 25 stocks that are most out-of-consensus in terms of earnings expectations, divided into upside and downside opportunities.

Key Stocks and Their Earnings Outlook

Upside to Estimates

• Schlumberger (SLB): Expected to benefit from US land activity, pricing concessions reversal, and synergies from the Cameron acquisition. GS analyst projects a 73% CAGR in earnings growth. 12-month price target: $94, implying 20% upside.
• J.P. Morgan (JPM): Likely to beat consensus despite an otherwise "ok" quarter for banks. Analyst expects core loan growth and trading improvements, with a 12-month price target of $69, implying 11% upside.
• Allergan (AGN): Strong pipeline and buyback program post-TEVA deal. Analyst sees 10bn share buyback program as a key driver, with 12-month price target of $238.28, implying 20% upside.
• Regeneron (REGN): Eylea continues to drive market share. Analyst models 39% upside, with EPS estimate 16% above consensus.
• General Motors (GM): Strong wholesales and China performance expected. Analyst forecasts 4% EPS beat, with 12-month price target of $31.00, implying 19% upside.
• Masco (MAS): Paint margin strength and other specialty segments are expected to drive earnings beat. Analyst models 13% upside, with EPS estimate 9% above consensus.
• Barrick Gold (ABX): Positive on gold fundamentals and potential for debt reduction. Analyst sees 23% upside, with EPS estimate 29% above consensus.
• Vulcan Materials (VMC): Strong pricing and cost reduction expected. Analyst models 18% upside, with EPS estimate 20% above consensus.
• Post Holdings (POST): Transition in the egg industry is expected to drive EBITDA growth. Analyst sees 17% upside, with EPS estimate 3% above consensus.
• Ciena (CIEN): Stronger-than-expected earnings expected due to better-than-consensus performance. Analyst models 10% upside, with EPS estimate 9% above consensus.
• Corning (GLW): Strong performance and positive EPS forecast. Analyst sees 5% upside, with EPS estimate 6% above consensus.
• Nvidia (NVDA): Strong demand for its products and better-than-expected earnings. Analyst models 9.8% upside, with EPS estimate 8% above consensus.
• SBA Communications (SBAC): Strong pricing and performance. Analyst models 3.8% upside, with EPS estimate 15% above consensus.
• Iululemon (LULU): Strong performance and positive EPS forecast. Analyst sees 11.5% upside, with EPS estimate 5% above consensus.
• Colfax (CFX): Stronger-than-expected earnings due to better-than-consensus performance. Analyst models 4.6% upside, with EPS estimate 5% above consensus.
• Intel (INTC): Expected to beat consensus despite the sector's challenges. Analyst sees 5.4% upside, with EPS estimate 16% above consensus.
• Western Union (WU): Positive EPS forecast and strong performance. Analyst models 6.1% upside, with EPS estimate 0% above consensus.
• IAC/InterActive (IAC): Expected to beat consensus due to better-than-expected performance. Analyst sees 5.2% upside, with EPS estimate 16% above consensus.
• Sanderson Farms (SAFM): Stronger-than-expected earnings due to better-than-consensus performance. Analyst models 3.9% upside, with EPS estimate -20% below consensus.
• Rowan (RDC): Expected to beat consensus due to better-than-expected performance. Analyst sees 7.2% upside, with EPS estimate -1% below consensus.
• Allied World (AWH): Expected to beat consensus due to better-than-expected performance. Analyst models 1.6% upside, with EPS estimate -19% below consensus.
• T. Rowe Price (TROW): Expected to beat consensus due to better-than-expected performance. Analyst sees 3.1% upside, with EPS estimate -19% below consensus.
• Kohl's (KSS): Expected to beat consensus due to better-than-expected performance. Analyst models 4.3% upside, with EPS estimate -20% below consensus.
• Phillips 66 (PSX): Expected to beat consensus due to better-than-expected performance. Analyst sees 4.6% upside, with EPS estimate -20% below consensus.
• Cree (CREE): Expected to beat consensus due to better-than-expected performance. Analyst models 10% upside, with EPS estimate -5% below consensus.

Downside to Estimates

• Kohl's (KSS): Expected to underperform due to lower-than-consensus earnings. Analyst models 11.2% downside, with EPS estimate -9% below consensus.
• Iululemon (LULU): Expected to underperform due to lower-than-consensus earnings. Analyst models 11.5% downside, with EPS estimate -5% below consensus.
• Cree (CREE): Expected to underperform due to lower-than-consensus earnings. Analyst models 10% downside, with EPS estimate -5% below consensus.
• Phillips 66 (PSX): Expected to underperform due to lower-than-consensus earnings. Analyst models 4.3% downside, with EPS estimate -20% below consensus.
• Rowan (RDC): Expected to underperform due to lower-than-consensus earnings. Analyst models 7.2% downside, with EPS estimate -1% below consensus.
• Allied World (AWH): Expected to underperform due to lower-than-consensus earnings. Analyst models 1.6% downside, with EPS estimate -19% below consensus.
• T. Rowe Price (TROW): Expected to underperform due to lower-than-consensus earnings. Analyst models 3.1% downside, with EPS estimate -19% below consensus.
• Intel (INTC): Expected to underperform due to lower-than-consensus earnings. Analyst models 5.4% downside, with EPS estimate -20% below consensus.
• Western Union (WU): Expected to underperform due to lower-than-consensus earnings. Analyst models 6.1% downside, with EPS estimate -4% below consensus.
• IAC/InterActive (IAC): Expected to underperform due to lower-than-consensus earnings. Analyst models 5.2% downside, with EPS estimate -16% below consensus.
• Sanderson Farms (SAFM): Expected to underperform due to lower-than-consensus earnings. Analyst models 3.9% downside, with EPS estimate -20% below consensus.
• Kohl's (KSS): Expected to underperform due to lower-than-consensus earnings. Analyst models 4.3% downside, with EPS estimate -20% below consensus.
• Cree (CREE): Expected to underperform due to lower-than-consensus earnings. Analyst models 10% downside, with EPS estimate -5% below consensus.

Key Information

• The 25 stocks are selected based on the most out-of-consensus earnings views from Goldman Sachs analysts.
• Call buying is recommended due to its historical profitability and the current high put skew, indicating investor caution.
• Options strategies should focus on at-the-money (ATM) options rather than out-of-the-money (OTM) options, as OTM options tend to inflate implied volatility.
• The term structure of options for certain sectors like Financials (XLF) is inverted, which may affect the attractiveness of short-term options.
• Earnings-day volatility is a key factor for traders, with higher volatility in sectors like Technology and Discretionary.
• The average earnings-day move is currently at ±5.1%, which is still above the average realized move of ±3.5% from last quarter.

Analysts and Contact Information

• John Marshall: (212) 902-6848, john.marshall@gs.com
• Katherine Fogerty: (212) 902-6473, katherine.fogertey@gs.com
• Vishal Vivek: (212) 934-7453, vishal.vivek@gs.com

Disclaimer

• Goldman Sachs does and seeks to do business with companies covered in its research reports.
• Investors should consider this report as only a single factor in making their investment decision.
• For Reg AC certification and other important disclosures, see the Disclosure Appendix or go to www.gs.com/research/hedge.html.
• Analysts employed by non-US affiliates are not registered/qualified as research analysts with FINRA in the U.S.