Another Successful Trading Recommendation

Quick Update on Family Dollar:

Yesterday, Family Dollar Stores ("FDO") reported earnings that disappointed the Street. For my readers and followers, this was not a surprise. Early Tuesday, July 6th, I wrote the following:

FDO shares have risen nearly 40% since the start of the year. If estimates do come in below analysts’ consensus as I anticipate, shares should fall quite precipitously.

I also gave a Trading Recommendation on the stock--Buy Puts. The day after the earnings announcement (Wednesday), shares closed with an 8.22% drop. On Tuesday just before the close, I actually followed my own advice and bought August puts, which I sold the next day for an 80%+ gain.

So far this earnings season I have given my readers correct Trading Recommendations on both Research in Motion ("RIMM") and FDO. RIMM fell 10.84% the day after its announcement and FDO dropped 8.22%. Monday, July 12th, marks the official beginning of the season. Estimates and recommendations have already been posted for companies like AT&T, UPS, CSX, Seagate Technology, United Healthgroup, IBM, Intel, Google, Exxon Mobil, and Hewlett-Packard.

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Disclaimer:
· At the time of publication, I do not have any open positions.
· Opinions, estimates and projections contained in this report are of the author as of the date published and are subject to change without notice.
· This report is not, nor should it be construed as, an offer to sell or solicitation of an offer to buy any securities.
· Unless otherwise noted, all research reports provide information of a general nature and do not address the circumstances of any particular investor.
· It is important to do your own due diligence on any position you enter.

Shipping & Storage

CSX Corporation

Q2 Rev Est.:  $2.50 Bil 

Q2 EPS Est.:  $0.83

On average, analysts are anticipating Q2 revenue for CSX to come in at $2.58 Bil with EPS of $0.94.  Once again, both of these figures are above my estimates of $2.50 Bil in revenue and $0.83 in earnings.  CSX shares have risen nearly 40% over the past 12 months.  This steady increase in share price, along with below-consensus earnings, should cause CSX stock to immediately fall after its July 12 earnings announcement. 

Income Statement
For the three months ended June 30, 2010
Revenue	$2,500
Expenses:
Labor and Fringe	$728
MS&O	$455
Fuel	$285
Depreciation	$231
Equipment	$99
Inland Transportation	$69
Total Expenses	$1,866
Operating Income	$633
Interest Expense	-$142
Other Income, Net	$11
EBT	$502
Taxes	-$177
NI from Cont. Oper.	$325
EPS from Cont. Oper.	$0.83

Trading Recommendation:  Buy Puts

For more on what a “Trading Recommendation” means, please click HERE.

Seagate Technology

Q4 Rev Est.:  $3.09

Q4 EPS Est.:  $0.94

On average, analysts are expecting $2.94 Bil in fourth-quarter revenue for Seagate (“STX”) with earnings of $0.83 per share.  Unlike CSX, these figures are actually below both my revenue and EPS estimates of $3.09 Bil and $0.94, respectively.  Currently, STX shares are trading at a 6-month low.  If the stock continues to remain weak through the first half of July, shares could see a nice jump upward immediately following the earnings announcement.    

Income Statement
For the three months ended July 2, 2010
Revenue	$3,086
Cost of Revenue	$2,174
Product Development	$229
M&A	$109
Amortization	$9
Restructuring	$5
Goodwill Impairment	$0
Total Operating Ex	$2,526
Income from Operations	$560
Interest Income	$2
Interest Expense	-$42
Other, net	$1
Other income, net	-$39
Income before Taxes	$521
Provision for Taxes	$42
Net Income w/ adj.	$493
Diluted EPS	$0.94

Trading Recommendation:  Buy Calls

For more on what a “Trading Recommendation” means, please click HERE.

CSX/STX Ownership

Author:   NO

Author’s Family:  NO

Disclaimer:
· Opinions, estimates and projections contained in this report are of the author as of the date published and are subject to change without notice.
· This report is not, nor should it be construed as, an offer to sell or solicitation of an offer to buy any securities.
· Unless otherwise noted, all research reports provide information of a general nature and do not address the circumstances of any particular investor.

· It is important to do your own due diligence on any position you enter.