Covered Call Trade on World Fuel Services (INT)

INT is currently trading at $37.85, up $2.30 today; rated 5 stars by S&P.

STRATEGY:

For a long-term trade income investment, look at the November 35 covered call.  For each 100 shares of World Fuel Services (INT) stock you buy, sell one November 35 covered call option for a 32.85 (37.85 – 5.00) debit or better.  That’s potentially a 6.6% assigned return. Plus, INT is expected to pay one tiny dividend during that period, which should boost the return a touch higher. The ex-dividend date on this distribution is expected in mid-September.

“S&P maintains Strong Buy opinion on shares of World Fuel Services (INT) . INT posts Q2 operating earnings of $0.70, vs. $0.61, above our $0.61 estimate, reflecting higher volumes than we expected at all three operating segments. We are encouraged by INT’s business model and growth prospects, as it gains market share with a more attractive customer base. We believe that EBITDA in 2011 will exceed $275 million, compared to 2010 EBITDA of $200 million. Based on Q2 results, we increase our ’11 EPS forecast to $2.59 from$2.50. We maintain our target price of $46, based on 17.8X our 2011 EPS projection, above historical multiples.”

World Fuel Services Corporation (INT) is a global fuel logistics company. It markets, sales and distributes aviation, marine, and land fuel products and related services on a worldwide basis. It operates in three business segments. Its aviation segment offers fuel and related services to commercial airlines, second and third-tier airlines, cargo carriers, regional carriers, fixed- based operators, corporate fleets, fractional operators, private aircraft, military fleets and to the United States and foreign governments. Its marine segment offers fuel and related services to a base of marine customers, including international container and tanker fleets and commercial cruise lines. Its land segment offers fuel and related services. During the year ended December 31, 2010, it acquired certain assets of Falmouth Oil Services Limited and Lakeside Oil Company, Inc., and acquired Western Petroleum Company and Shell Company of Gibraltar, Limited.

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