NEW DIRECTIONAL CALL PLAYS

Lockheed Martin Corp. - LMT - close: 167.17 change: +0.84

Stop Loss: 163.95
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
LMT is in the industrial goods sector. The company is a major players in aerospace technology and the defense industry. Business has been booming for this defense contractor. Q4 earnings came in better than expected on both the top and bottom line. The trend continued when LMT reported its Q1 results on April 22nd. Wall Street expected a profit of $2.53 a share on revenues of $10.89 billion. LMT beat the bottom line estimate with $2.87 per share but missed the revenue estimate at $10.65 billion for the quarter. However, management gave an optimistic outlook and raised their 2014 guidance on both net profits and revenues.

Zacks had some interesting numbers on LMT's Q1 results. LMT's operating margins were at record highs and the first quarter of 2014 saw LMT's free cash flow hit a record $2.0 billion. LMT spent $1.1 billion buying back 7.0 million shares of stock and another $500 million on dividends.

It's not surprising to hear LMT management raising guidance. The company has been on a huge roll with a series of big contract wins from the U.S. Department of Defense. Just this past week LMT beat out Raytheon Company (RTN) for a $915 million contract to build a "space fence" for the U.S. Air Force. This "fence" is actually a radar system that will track and categorize up to 500,000 pieces of space junk orbiting the earth.

LMT is also seeing strong business overseas. Right now they're rumored to be the top pick for Canada to buy 65 new fighter jets. Canada's decision is expected in the new few weeks. Right now they're reviewing bids from LMT's rivals. Russia recent actions may have also generated more business for LMT. Since Russia invaded and annexed Crimea earlier this year LMT said they've seen a lot more interest from European countries looking to upgrade their defenses.

Technically shares of LMT are in a long-term up trend. They have spent the last three months consolidating gains and building a new base. A breakout past its recent highs could launch the next leg higher.

We are suggesting a trigger to buy calls at $168.55. We're not setting an exit target just yet but the Point & Figure chart for LMT is bullish with an $188 target.

Trigger @ $168.55

- Suggested Positions -

Buy the Sep $175 call (LMT140920C175) current ask $2.35

Option Format: symbol-year-month-day-call-strike

Annotated Chart:

Weekly Chart:

Entry on June -- at $---.--
Average Daily Volume = 1.2 million
Listed on June 07, 2014


Thermo Fisher Scientific, Inc. - TMO - close: 119.81 change: +0.81

Stop Loss: 115.90
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
TMO is in the healthcare sector. The company makes analytical instruments, equipment, reagents and consumables. Plus they provide software, and services for research, manufacturing, analysis, discovery, and diagnostics in the United States and abroad. The story looks pretty simple. TMO is executing its business well. The company is developing a trend of beating analysts' estimates on both the top and bottom line and raising guidance. They've done it two quarters in a row.

TMO reported its Q1 results on April 23rd. Analysts were expecting a profit of $1.40 per share on revenues of $3.78 billion. TMO delivered $1.53 per share and revenues grew +22.3% from a year ago to $3.9 billion. How many companies are growing that fast? Shares did see a pullback when the markets were selling all the high-growth names in March and April. Investors have stepped up to buy the pullback.

At its Q1 earnings announcement TMO's management also raised their 2014 guidance on both the top and bottom line. A few weeks later at least one analyst firm issued bullish comments on TMO stating their opinion that TMO's management is being too conservative, even with their raised guidance.

Wall Street seems pretty happy with TMO's recent acquisition of Life Technologies for $13.6 billion. The deal is accretive to TMO's bottom line and should generate significant synergies. The new, combined company is seeing strong growth in Asia, especially in China. TMO is currently aiming to generate 25% of its annual revenues from China by 2016.

Technically shares of TMO are bouncing from its long-term up trend. They have also just recently broken out from its three-month consolidation and down trend of lower highs. Right now TMO is trading just below $120.00. We're suggesting a trigger to buy calls at $120.50.

Trigger @ $120.50

- Suggested Positions -

Buy the Sept $125 call (TMO140920C125) current ask $3.10

Option Format: symbol-year-month-day-call-strike

Annotated Chart:

Weekly Chart:

Entry on June -- at $---.--
Average Daily Volume = 1.7 million
Listed on June 07, 2014