Boeing stock has been a great price performer in the Dow Jones Industrial Average in recent months. Besides Boeing (BA), the earnings calendar has plenty of reports from the semiconductor sector, including results from chip-equipment firms ASML (ASML), KLA (KLAC) and Lam Research (LRCX).
It’s still early in Q4 earnings season amid plenty of worries about a recession and the potential impact on corporate profits. Sellers hit United Airlines (UAL) hard Wednesday despite strong growth and bullish guidance. Group peer American Airlines (AAL) gapped up on Jan. 12 after the company forecast Q4 earnings and revenue well ahead of expectations. AAL reports Thursday before the open.
Results from Tesla (TSLA) are due Wednesday after the close, along with Leaderboard stock United Rentals (URI).
After a strong earnings report from oilfield services giant SLB (SLB) Friday, investors will be watching for results from group peer Halliburton (HAL).
Results are due Tuesday before the open, with adjusted profit expected to jump 86% to 67 cents a share, with revenue up 30% to $5.58 billion. HAL stock pulled back to its 21-day exponential moving average Thursday and found support near a 40.09 entry.
Boeing Stock In Rally Mode
Some might argue that a lot of good news has been priced into Boeing stock, with shares up more than 70% from a late-September low of 120.99. That’s a big move, no doubt, but Boeing is still holding near highs and above its 21-day exponential moving average.
When Boeing reported Q3 results in late October, revenue increased 4% to $15.96 billion. The results halted three straight quarters of declining revenue but still missed the consensus estimate of $17.76 billion.
The bright spot was Boeing’s commercial airline business, which saw revenue jump 40% to $6.26 billion. The results were driven by higher 737 deliveries and the resumption of 787 deliveries. Boeing delivered 112 planes in Q3, up from 85 in the year-ago quarter.
Boeing ended the quarter with $13.49 billion in cash and long-term debt of $51.79 billion.
For the current quarter, the Zacks consensus estimate is for adjusted profit of 30 cents a share, compared to a loss of $7.69 a share a year ago. Revenue is expected to jump 31% to $19.43 billion. Results are due Wednesday before the open.
Several industry group peers of Boeing are also on the earnings docket, including Lockheed Martin (LMT), Raytheon Technologies (RTX) and General Dynamics (GD).
Chip Stocks To Watch
Semiconductor stocks have also been showing relative strength amid hopes that the worst of the chip glut may be over.
Dutch chip-equipment firm ASML has come under some selling pressure ahead of its earnings report Wednesday before the open. ASML shows choppy growth in recent quarters, but it does have a big annual earnings estimate this year, with profit expected to jump 34% from 2022.
For the company’s Q4, analysts’ consensus revenue estimate is $6.648 billion, an increase of nearly 18% according to FactSet.
Elsewhere in the group, KLA reports Thursday after the close. Results from Lam Research are due late Wednesday.
Options Trading Strategy
A basic options trading strategy around earnings — using call options — allows you to buy a stock at a predetermined price without taking a lot of risk. Here’s how the options trading strategy works and what a call option trade recently looked like for Boeing stock.
First, identify top-rated stocks with a bullish chart. Some might be setting up in sound early-stage bases. Others might have already broken out and are getting support at their 10-week moving average for the first time. And a few might be trading tightly near highs and refusing to give up much ground. Avoid extended stocks that are too far past proper entry points.
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In options trading, a call option is a bullish bet on a stock. Put options are bearish bets. One call option contract gives the holder the right to buy 100 shares of a stock at a specified price, known as the strike price.
Put options are for weak performers with bearish charts. The only difference is that an out-of-the-money strike price is just below the underlying stock price. A put option gives the holder the right to sell 100 shares of a stock at a specified price.
You earn profits when the stock falls below the strike price with a put option.
Check Strike Prices
Once you’ve identified an earnings setup for a call option, check strike prices with your online trading platform, or at cboe.com. Make sure the option is liquid, with a relatively-tight spread between the bid and ask.
Look for a strike price just above the underlying stock price (out of the money) and check the premium. Ideally, the premium should not exceed 4% of the underlying stock price at the time. In some cases, an in-the-money strike price is OK as long as the premium isn’t too expensive.
Choose an expiration date that fits your risk objective but keep in mind that time is money in the options market. Near-term expiration dates will have cheaper premiums than those further out. Buying time in the options market comes at a higher cost.
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This options trading strategy lets you capitalize on a bullish earnings report without taking too much risk. Risk is equal to the cost of the option. If the stock gaps down on earnings, the most you can lose is the amount paid for the contract.
Boeing Stock Option Trade
Here’s what a recent call option trade looked like for Boeing.
When Boeing stock traded around 209, a slightly out-of-the-money weekly call option with a 210 strike price (Feb. 10 expiration) came with a premium of around $7.75 per contract, or 3.7% of the underlying stock price at the time.
One contract gave the holder the right to buy 100 shares of Boeing stock at $210 per share. The most that could be lost was $775 — the amount paid for the 100-share contract.
When taking the premium paid into account, Boeing would have to rally past 217.75 for the trade to start making money (210 strike price plus $7.75 premium per contract).
Keep in mind this is a trade for a larger portfolio because buying 100 shares of Boeing stock at 210 would cost $21,000.
Follow Ken Shreve on Twitter @IBD_KShreve for more stock market analysis and insight
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