Third Quarter Thursday – Earnings Season Begins!


Earnings season preview: weakness to continue into Q3 - Shares and ETFs -  IG CommunityThank God for FACTS! 

I am so sick of the rumors, the fear-mongering, the baseless calls that analysts like to make rather than actually doing their homework…  Now it is time for our beloved Corporate Masters to put up or shut up and expectations could hardly be lower at this point – so it’s a very low bar to clear.

-6.6% is the average analysts expectation for Q3 earnings EVEN THOUGH we just saw in the recent GDP Report that ACTUAL Corporate Profits hit a record high.  That’s a FACT that does not fit the narrative they have been shoving down our throats, right?  

Delta (DAL) just announce RECORD profits this morning – even with just 83% of their fleet flying (labor shortages, Covid shutdowns) and even with higher labor costs and a summer of TERRIBLE delays at airports all over the World AND a hurricane.  Revenue was up 11% in Q3.  They are also forecasting Q4 EPS over $1 vs 0.80 estimated by “analysts.”

The Trade Idea for DAL in our Long-Term Portfolio (LTP) is:

Delta (DAL) LTP Position - Oct 13 2022

As you can see we spent net $7,000 on the $30,000 spread that’s $15,000 in the money at $30 with an aggressive short put target.  We haven’t been worried enough to adjust the put since November of 2021 and now we’re going to be right back on track for $40 by January, 2024 – where our target profit is $23,000 (328%) – you’re welcome!  

Notice we sold the $40 puts for $10 so $30 was our predicted bottom and, when we hit it in July, despite the bad chart – we ADDED our bull call spread, which is what we hoped to do 8 months earlier when we sold the put, which reminds us to watch Delta in case they get cheap.  When we sell a short put, it means we REALLY would like to buy the stock at the net price (AFTER re-evaluating it, of course).  

WBA (another one we love down here), BLK (got ’em), TSM, FAST, and CMC also beat this morning and DPZ (yuch!) missed and earnings season starts in earnest next week.  

8:30 Update:  WOW!!!  CPI data came in higher than expected (Core at 6.6%!) and that, coupled with yesterday’s hawkish Fed Minutes, sent the indexes crashing lower with the Dow dropping almost 1,000 points in 15 minutes.  Stability?  What stability?  

This is, of course, a ridiculous over-reaction to what is simply the same situation we’ve been in since June with higher rents and energy prices driving inflation – so you can thank OPEC and Housing for this one.  That puts even more pressure on companies to perform to avoid being swept up in this negative tide.  

Sept 2022 CPI

The good news is, DAL went right back on sale so you can still pick it up very close to our original net.  You can play the Futures for the bounce this morning:

  • Dow (/YM) 28,750
  • S&P (/ES) 3,500
  • Nasdaq (/NQ) 10,500
  • Russell (/RTY) 1,650 
  • Natural Gas (/NG) $6.50
  • Gold (/YG) $1,650 
  • Silver (/SI) $18.50

Be careful out there…

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Hear, Hear!

Good Morning.

Ay caramba!

the fear is 75 bps in Dec as well, which apparently the market isnt pricing.
The whole action is silly (by everyone) – but on the bright side, 2 yr treasuries hit almost 4.5%; good place to park cash

Isn’t France 80% nuclear?

phil / hedging

400 SQQQ 30 2024 at $42 (cost basis $19.25)
400 SQQQ 80 2024 at $27 (cost basis $17.04)

I have balanced SQQQ hedge.

300 TZA 40 2024 at 19.72 (cost basis 16.42)
500 TZA 60 2024 at 15.72 (cost basis 13.22)

I have sold TZA 40 along the way. TZA is moving as much as SQQQ.

Any tweaks to this?

Don’t worry too much Phil…you aren’t in the least associated with those idiots. Lol.

I guess BLK earnings were ok.

BLK is buying back shares at a good pace.

I am assuming that SBUX has some long term contracts and this inflation hasn’t hit them yet, but eventually it will tighten their margins along with raising wages. It will be fun to watch. I have seen it in the store, a bag of beans was around $6 before the pandemic and now they are all over $10.

Phil – SPWR
They’ve gotten knocked back down to $17.9 after BofA downgrade and now an law firm investigation into alleged securities fraud by officer/directors of SPWR. I smell BS (feels too orchestrated) but wanted to get your thoughts. I did roll my short puts to 24and picked up a few25 BCS just for giggles.