Harsco’s Big Debut, The Chemours Company Finally Delivers and more…

The dog days of summer don’t apply to the stock market. In addition to the busy earnings schedule, the constant shift on tariffs are keeping traders on their toes.

I am teeing up a few new options trades, which I expect you will see early this week. As always, please ensure you are signed up for text alerts. I purposely try to time options trade alerts for days without influential news. The hope is that the price limits that I suggest will still be relevant when you see the alert and can execute it.

As you can imagine, predicting quiet days in the market is harder than ever. Even if the stock-specific news is absent, external events can disrupt my planning.

If my suggested price limits become unusable immediately after issuance, I will post an update with my thoughts about how to proceed. Most times, I suggest some wiggle room around the proposed price limits and patience for a few days post alert to see if you are filled.

We closed out the Titan (NSDQ: TITN) puts for a 30% gain on Friday. I’m watching the Agco (NYSE: AGCO) puts closely. They don’t expire until November, but we are well underwater in them. I suggested buying them with a $2.15 limit, and they are currently trading at $1.05.

I expect more disappointing news out of the agriculture sector but must admit I did not expect the government’s announcement of a possible $12 billion farm bail out. The details are sparse, and my gut tells me between now and the time that the logistics are finalized, demand for farm equipment will continue to soften.

It’s a quieter week for earnings but note below some comments I have regarding expectations for some of these names and updates on other names about which subs have asked.

On deck for earnings this week: (I apologize as I thought ANIP was going to report last week, but the date was not confirmed. Looks like it will be this Tuesday).

Tuesday: AM: Air Transport Services (NSDQ: ATSG), ANI Pharma (NSDQ: ANIP)

Tuesday: PM: Ichor Systems (NSDQ: ICHR)

Thursday: AM: Smart Sand (NSDQ: SND)

Around the Portfolio:

Agco Corp. (NSDQ: AGCO) reported a good quarter last Tuesday but did not raise annual estimates. In effect, this lowers expectations for the balance of the year. And while management seemed bullish, it did note increased levels of inventory of equipment at dealers in the U.S.  

There’s nothing new on BJ’s (NYSE: BJ) since the flurry of initiations two weeks ago. The company reports earnings on Aug. 22nd and I don’t know of any other comparable companies reporting before so expect the stock to tread water with the market until then. It is well above the $17 IPO price, which is helpful technically. I would worry if the stock falls to the $21.25 area, which is where it opened on the IPO day. At that level, sellers who risk being underwater on new purchases might enter the market. I will issue an alert if I think a sale is warranted.

The Chemours Company (NYSE: CC)  reported a great second quarter. Earnings were $1.71, versus the consensus of $1.59 and revenue was inline. Most importantly, the company raised guidance for its environmentally friendly Opteon refrigerant product to 30% for the year, which implies 40% plus growth in the second half of the year.

The quarter looked incredibly clean to me: expanding margins, robust cash flow, and subdued expense growth. Also, it increased its dividend by 47% and initiated a second stock repurchase.

After reviewing the transcript, my best guess is that the stock had been under pressure due to fears regarding competition and/or saturation in the auto market. Management did a solid job of allaying those fears. The stock got as high as $49 but sold off a bit to close up 7.5% on the day, and I expect it to move higher.

Harsco (NYSE: HSC) reported earnings of $0.48 per share, $0.15 better than analysts’ estimate of $0.33 and revenues rose 9.4% year/year to $432 mln vs. the $426.3 estimate. The company also issued upside guidance for Q3 and for the year.

This stock is covered by only two analysts, one at KeyBanc and the other at Lake Street Capital. I think it’s a great play on new steel manufacturing, which is coming online regardless of any tweaks to tariffs. It will present at a Jefferies industrial conference on August 7 and an Oppenheimer conference later in August.

Stay tuned to see if analysts from these shops pick up coverage of the stock. I expect the stock to rise as more investors learn about the company.

Ichor Systems (NSDQ: ICHR) reports Aug 7. The stock is selling off with every stock in the semiconductor group. Investors are panicked that demand for wafer equipment is falling. This slowdown is well documented. Customer Lam Research (NSDQ:LRCX) attempted to call a turn in demand on its earnings call last week. This bullish note helped to lift the stocks a bit. Despite the stock being incredibly cheap, and not entirely dependent on the expansion of wafer equipment, I worry the psychology may remain negative for a while. I am considering a stop loss on this one.

Saia (NSDQ: SAIA) joined the rest of the truckers with a similar story; an earnings beat but little upside in the stock. The trucking group is a frustrating one as investors still refuse to give these stocks any credit for the secular demand in trucking, which I expect to counteract any expected (and yet to be seen) cyclical weakness.

It reported earnings of $1.15 per share, $0.04 better than the Capital IQ Consensus of $1.11 and revenues up 17.7% year/year to $428.73 mln vs. the $416.95 mln Capital IQ Consensus.

LTL shipments and tonnage rose 4.3% and 7.7%, and rates increased 9.6%. The company’s operating ratio improved by 160 basis points to 90.3%

Systemax (NYSE: SYX) reported a strong quarter, but disappointment over the price it received for its French business sent the stock lower. Although the French reseller business is a small portion of income, it’s been growing faster than the rest of the company.

This has been a good stock for us (up 36% even after the recent drop), so I’m reviewing whether it’s worth holding on to. It was up as much as 64% before it announced the price for the French business.

Synchrony Financial (NYSE: SYF) continues to lick its wounds from the loss of the Walmart contract. I certainly did not expect them to lose the Walmart contract when I recommended the stock, but I do think the decision to exit the contract is prudent.

SYF has been executing on a plan to improve the credit scores of their receivables and WMT wanted them to loosen credit requirements. I’m reviewing my estimates but believe holding it is the best option as recent earnings trends are very favorable.

Barron’s magazine had a very favorable review of the stock this weekend, highlighting comments from an analyst at CS First Boston. That analyst notes that Synchrony has been diversifying its customer base and that the recent deal with PayPal is “more than capable” of replacing the lost Walmart income.

Smart Sand (NYSE: SND) reports on Aug 9. I continue to gather data from oil experts that note a shortage of sand in the fracking fields. I pointed out in a previous recap that the area SND focuses on has significantly less new capacity than the Permian Basin. Lastly, I would note the substantial upward move in peer High Crush (NSDQ: HCLP), who operates in a different area, when it announced a new leg of distribution. This strategy is precisely what SND is doing.

Stock Talk

Asjad Shamim

Asjad Shamim

Hi Linda,
As usual great update around the portfolio 🙂

Have quick question on AGCO trade.
– Though the expiration is in Nov, do you anticipate it to come back to at least around $2? Believe the today’s price, it went below $1
– Would you be recommending to sell to limit the loss soon or hold for another few weeks to check pattern?

Linda McDonough

Linda McDonough

Thanks for the kind words. I am reviewing the AGCO trade and considering rolling it forward. You’ll see an alert when I figure out what might be the best route.

C. Fisher

C. Fisher

Can you comment on recent SND earnings? Do you see any upside before the next earnings? It seems like dead money and I don’t really see the reason. Does this stock have much of a profile for open market buys or maybe a dividend?

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