Today’s news: Schlumberger (SLB) third-quarter results meet Wall Street’s estimates, Commercial Metals (CMC) and XL Group (XL) move from Buy to Hold, and price action on Mattel (MAT).
Commercial Metals Company (CMC – yield 2.2%) moves from Buy to Hold as it approaches its December 2016 high near 24. I’ll keep CMC in the portfolio for additional capital gains in 2018. When the stock seems ready to subsequently break out—or when it experiences a decent pullback—I’ll alert you to timely buying opportunities. Expect volatility. Hold.
Mattel (MAT – yield 3.8%) – Traders and other risk-tolerant investors should note that the MAT price chart is signaling an immediate breakout. I’d like to move Mattel from Hold to Buy right now, but third-quarter results are due on October 26. If the market likes management’s guidance at that time, I believe it will signal the “all clear” to the stock and we’ll see a nice share price run-up until early December. At that time, investors should expect a round of tax-loss selling that could bring on another price correction. Hold.
Schlumberger (SLB – yield 3.2%) reported third-quarter results this morning. Earnings per share (EPS) of $0.42 were in line with analysts’ estimates. Revenue came in slightly higher than expected. The company repurchased $98 million of stock during the quarter.
Once again, news headlines made the company’s future sound foreboding. Then I read the actual earnings press release. Why do I even bother glancing at news headlines? The company is doing very well, oil prices are rising, Schlumberger is gaining North American market share and increasing activity in Russia, Asia and the North Sea. Revenue grew in Europe, Russia and Africa, and decreased in Latin America. The one area where business is contracting is the U.S. Gulf of Mexico, and that’s where the journalists pounced.
The company is experiencing aggressive earnings growth in both 2017 and 2018. The stock is testing its recent lows, and I expect SLB to promptly turn around and rise again. There’s 37% upside plus dividends as SLB eventually retraces its December 2016 high near 86. Buy SLB now. Strong Buy.
XL Group (XL – yield 2.1%) moves from Buy to Hold as it rises toward its recent July high near 47. In the interim, I’ll decide whether to keep the stock longer term as I assess post-hurricane market sentiment toward reinsurance companies vs. other more immediate capital gain opportunities. The company remains in a strong financial position. Hold.