Does Kohl’s Support New Yearly Highs?

With shares of Kohl’s (NYSE:KSS) trading around $52, is KSS an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework.

T = Trends for a Stock’s Movement

Kohl’s operates department stores in the United States. Its stores offer private, exclusive, and nationally branded apparel, footwear, and accessories for women, men, and children; soft home products, such as sheets and pillows; and housewares targeted at middle-income customers. As of June 14, it operated 1,155 stores in 49 states. The company also provides online shopping through its website.

Kohl’s recently revealed that it will be opening three new stores and remodeling another 30. So far this year, the retailer has opened 12 new locations. Seeking Alpha notes that one of the new stores in Massachusetts will feature an electric vehicle charging station, making it the 70th Kohl’s location equipped to charge electric vehicles.

T = Technicals on the Stock Chart Are Mixed

Kohl’s stock has not made much progress in the past several years. The stock is currently trading near the top of a range extending back a few years. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Kohl’s is trading between its key averages, which signals neutral to bullish price action in the near term.

KSS

Source: Thinkorswim

Taking a look at the implied volatility and implied volatility skew levels of Kohl’s options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Kohl’s Options

26.71%

83%

81%

What does this mean? This means that investors or traders are buying a very significant amount of call and put options contracts as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

October Options

Flat

Average

November Options

Flat

Average

As of Friday, there is average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a very significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.

E = Earnings Are Rising Quarter Over Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Kohl’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Kohl’s look like and, more importantly, how did the markets like these numbers?

2013 Q2

2013 Q1

2012 Q4

2012 Q3

Earnings Growth (Y-O-Y)

4.00%

4.76%

-8.62%

13.75%

Revenue Growth (Y-O-Y)

2.00%

-1.04%

5.38%

2.61%

Earnings Reaction

5.25%

4.73%

-1.09%

-5.09%

Kohl’s has seen rising earnings and revenue figures over the last four quarters. From these numbers, the markets have had mixed feelings about Kohl’s recent earnings announcements.

P = Weak Relative Performance Versus Peers and Sector

How has Kohl’s stock done relative to its peers, Target (NYSE:TGT), Wal-Mart (NYSE:WMT), and TJX Companies (NYSE:TJX), and sector?

Kohl’s

Target

Wal-Mart

TJX Companies

Sector

Year-to-Date Return

20.99%

8.31%

8.84%

33.07%

15.68%

Kohl’s has been a poor relative performer, year to date.

Conclusion

Kohl’s is a department store retailer that operates locations across the United States. The company is reportedly getting ready to open three new stores, one of which will include an electric vehicle charging station. The stock has not made significant progress in recent years and is now trading near the top end of its range. Over the last four quarters, earnings and revenues have been rising. However, investors have had mixed feelings about recent earnings announcements. Relative to its peers and sector, Kohl’s has been a weak year-to-date performer. WAIT AND SEE what Kohl’s does at current prices.

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