NEW DIRECTIONAL CALL PLAYS
Tempur Sealy Intl. - TPX - close: 77.77 change: +0.28
Stop Loss: 74.25
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 711 thousand
Entry on August -- at $---.--
Listed on August 15, 2015
Time Frame: Exit PRIOR to earnings in late October
New Positions: Yes, see below
TPX is turning out to be one of the better performing stocks this year. The S&P 500 index is only up +1.6% in 2015. Yet TPX has soared +41%. That's because the company has been delivering with its earnings results.
If you are not familiar with TPX they are in the consumer goods sector. According to the company, "Tempur Sealy International, Inc. (TPX) is the world's largest bedding provider. Tempur Sealy International develops, manufactures and markets mattresses, foundations, pillows and other products. The Company's brand portfolio includes many of the most highly recognized brands in the industry, including Tempur®, Tempur-Pedic®, Sealy®, Sealy Posturepedic®, Optimum® and Stearns & Foster®. World headquarters for Tempur Sealy International is in Lexington, KY."
Back in February this year shares of TPX plunged from about $56.00 down to $49.00 when the company warned and lowered their earnings and revenue guidance for all of 2015. This may be a case of setting expectations with an under promise and over deliver strategy.
Looking at TPX's recent earnings results they have beaten Wall Street's estimates on both the top and bottom line the last three quarters in a row. They've actually raised their 2015 earnings guidance the last two quarterly reports.
TPX's most recent report was July 30th. The company's Q2 profit swung from a loss a year ago to a profit of $0.53 per share. That was eight cents better than expected. Their adjusted net income was up +38.8% from a year ago and up +49% on a constant currency basis. Revenues were up +6.9% to $764.4 million, above expectations. Gross margins improved +140 basis points to 38.9%. TPX said they saw double digit sales growth in both North America and internationally (when you back out currency headwinds). Management raised their 2015 earnings guidance from $2.80-3.15 per share to $3.00-3.20.
Shares of TPX surged on this bullish outlook and rallied toward $78.00. The last two weeks have seen TPX consolidate sideways under this new resistance at $78.00. Shares have been relatively resistant to the market's volatile swings in August. If shares can breakout past $78 we could see TPX make a run towards its all-time high near $87.50 set in April 2012. The point & figure chart is more optimistic and forecasting at $95.00 target.
Tonight we are suggesting a trigger to buy calls at $78.25. Plan on exiting prior to TPX's earnings report in late October.
Trigger @ $78.25
- Suggested Positions -
Buy the DEC $85 CALL (TPX151218C85) current ask $3.10
option price is a current quote and not a suggested entry price.
Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.
Option Format: symbol-year-month-day-call-strike