Schaeffer's Trading Floor Blog

Earnings on Deck: Alcatel Lucent SA (ADR), Chiquita Brands International Inc, and Ralph Lauren Corp

Previewing ALU, CQB, and RL ahead of their upcoming earnings reports

by 5/8/2014 11:23 AM
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Although earnings season is starting to wind down, a plethora of notable names are still waiting in the wings. Among the companies scheduled to report tomorrow are France-based telecom concern Alcatel Lucent SA (ADR) (NYSE:ALU), banana behemoth Chiquita Brands International Inc (NYSE:CQB), and apparel maker Ralph Lauren Corp (NYSE:RL). Here's a quick look at these names as earnings approach.

  • Alcatel Lucent SA (ADR) (NYSE:ALU) will report first-quarter earnings before the open tomorrow. The company has fallen short of the Street's bottom-line estimates in six of the past seven quarters, yet the shares have averaged a one-week post-earnings gain of 6.9%. Upside momentum in the wake of tomorrow's earnings release could be limited, though, if traders believe recent rumors that a potential Nokia Corporation (ADR) (NYSE:NOK) bid for ALU at $4.10 per share are true. In addition, the stock is staring up at its 20-week moving average, which has rejected ALU's advances over the past couple of months. From a sentiment perspective, while long calls have outnumbered puts by a significant margin during the past two weeks, speculators have been picking up the latter at a faster-than-usual clip. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio of 0.12 stands higher than 76% of all comparable readings from the past year. Meanwhile, analysts are also wary, with more than half of the covering brokerage firms doling out "hold" or worse ratings. In early trading, ALU has added 2.5% to flirt with $4.02, but remains 8.6% lower year-to-date.

  • Chiquita Brands International Inc (NYSE:CQB) will also unveil its first-quarter figures before the open tomorrow. The firm has missed the consensus per-share estimate in six of the past eight quarters, translating into a one-week post-earnings loss of 3%, on average, for the stock. Fundamentally, Chiquita is being sued for allegedly funding a paramilitary group responsible for the deaths of thousands of Columbian workers, and is awaiting regulatory approval to merge with Ireland-based Fyffes. Technically speaking, CQB has given up 2.1% in 2014, and was last seen 0.2% lower at $11.46. From a sentiment standpoint, more than a few traders are gambling on steeper losses for CQB, as short interest skyrocketed 44% during the past two reporting periods, and now represents six sessions' worth of pent-up buying demand, at the stock's average pace of trading.

  • Finally, Ralph Lauren Corp (NYSE:RL) will reveal its fiscal fourth-quarter report bright and early tomorrow. The company has matched or surpassed analysts' per-share profit projections in each of the past eight quarters, yet the stock averages a one-week post-earnings loss of 0.7%. Nevertheless, Wall Street remains optimistic, with nine out of 14 brokerage firms doling out "buy" or better endorsements, and not a "sell" in sight. Plus, the equity's 10-day ISE/CBOE/PHLX call/put volume ratio of 6.81 sits just 14 percentage points from an annual high, pointing to a healthier-than-usual appetite for bullish bets of late. What's more, short-term speculators are willing to pay up to bet on RL. The security's Schaeffer's Volatility Index (SVI) has ascended to a 12-month high of 50%, implying that RL's short-term options are expensive right now, historically speaking. At last check, RL had added 1.5% to $154.86, trimming its year-to-date deficit to 12.3%.

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