NEW DIRECTIONAL CALL PLAYS
The Boeing Company - BA - close: 148.40 change: +0.33
Stop Loss: 144.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 3.8 million
Entry on November -- at $---.--
Listed on November 02, 2015
Time Frame: Exit PRIOR to earnings
New Positions: Yes, see below
Defense stock investors have had a frustrating year with the group peaking in March 2015 and sliding lower the next six months. Fortunately the defense industry appears to have reversed higher. BA is leading the charge.
BA is in the industrial goods sector. According to the company,
"Boeing is the world's largest aerospace company and leading manufacturer of commercial jetliners and defense, space and security systems. A top U.S. exporter, the company supports airlines and U.S. and allied government customers in 150 countries. Boeing products and tailored services include commercial and military aircraft, satellites, weapons, electronic and defense systems, launch systems, advanced information and communication systems, and performance-based logistics and training."
The company has delivered strong earnings results the last three quarters. Their most recent report was October 22nd. Wall Street was expecting BA's Q3 numbers to be $2.20 per share on revenues of $24.78 billion. The company beat expectations on both fronts. Earnings rose +18% from a year ago to $2.52 a share. Revenues were up +9% to $25.85 billion. Their free cash flow surged from $317 million a year ago to $2.3 billion. Their backlog is huge at $485 billion and nearly 5,700 commercial airplanes.
If that wasn't good enough BA's management raised their guidance. The company upped their fiscal year 2015 earnings guidance from $7.70-7.90 to $7.95-8.15. They also raised their revenue estimate from $94.5-96.5 billion to $95.0-97.0 billion. This compares to Wall Street estimates at $8.08 per share on revenues of $95.4 billion.
BA's president and Chief Executive Officer Dennis Muilenburg commented on his company's performance:
"By continuing to profitably deliver on our large and diverse backlog, we are driving strong growth in revenue, earnings and cash flow. Solid operating performance across our commercial and defense businesses during the quarter also supported our continued investment in innovation and our people, and our commitment to return cash to shareholders.
Three quarters of solid results and confidence in our continued operating performance enabled us to raise our revenue, earnings per share and operating cash flow guidance for the year. Looking ahead, our teams remain focused on improving productivity and quality and delivering improved capabilities to meet our customers' expectations."
Shares of BA bottomed in August with the market's sharp correction lower. Traders bought the dip in late September near $127.50. Since then BA's stock has surged toward $150. We see a breakout past round-number resistance at $150.00 as a potential entry point. If BA breaks out it could rally toward its 2015 high near $159.00. The point & figure chart is bullish and forecasting at $165 target. Coincidentally the average analyst price target is also $165.
Tonight we are suggesting a trigger to buy calls at $150.25.
Trigger @ $150.25
- Suggested Positions -
Buy the 2016 JAN $155 CALL (BA160115C155) current ask $2.02
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