Schaeffer's Trading Floor Blog

Earnings on Deck: Google Inc (GOOGL), Seagate Technology PLC, and General Electric Company

Taking a closer look at GOOGL, STX, and GE ahead of their earnings reports

by 7/17/2014 10:45 AM
Stocks quoted in this article:

Earnings season is hitting its stride, with roughly a quarter of Dow components and about 58 S&P 500 Index (SPX) companies reporting this week. On tap tonight are quarterly results from tech issues Google Inc (NASDAQ:GOOGL) and Seagate Technology PLC (NASDAQ:STX), while blue chip General Electric Company (NYSE:GE) will unveil its report ahead of tomorrow's open. Here's a quick look at this trio of names as earnings approach.

  • GOOGL's highly anticipated second-quarter earnings report will hit the Street after tonight's close, and over the past eight quarters, the company has fallen short of bottom-line estimates four times. Following its last turn in the confessional in mid-April, a 14-cent profit miss sent the shares 3.7% lower in the subsequent session, which widened to a loss of 5.2% going out one week. Another poorly received report could spark another wave of post-earnings downgrades and/or price-target cuts. Currently, 89% of covering analysts maintain a "buy" rating on Google Inc, while the consensus 12-month price target of $660.37 stands at a healthy 12.5% premium to the equity's present price of $586.74.

  • STX also has a mixed history on the earnings stage, and has fallen short of consensus profit estimates in four of the past eight quarters. The stock has been in rally mode in the two months leading up to tonight's report -- nearly 26% higher from its May 9 low of $48.49 to trade at $61.01, thanks to a sharp bounce off its 200-day moving average. In the options pits, pre-earnings traders have shown a preference for long calls, as evidenced by the security's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 1.74, which ranks in the bullishly skewed 66th annual percentile. With 6.2% of the stock's float sold short, though, a portion of this activity could be at the hands of shorts hedging against any post-earnings upside. One week after a bottom-line win in May 2013, Seagate Technology PLC was sitting 14.6% higher.

  • In the wake of reports that GE is looking to unload its home appliance unit, the security is down 0.5% to linger near $26.89. If past is prologue, the stock could be poised to pare these losses after reporting earnings tomorrow morning. Specifically, the equity has averaged a single-session post-earnings gain of 0.5% over the past eight quarters, which includes a 1.7% pop in the wake of last April's first-quarter results. Sentiment toward the Dow component has been strongly bullish of late. At the ISE, CBOE, and PHLX, the stock's 50-day call/put volume ratio of 4.91 ranks higher than 90% of comparable readings taken in the past year. Additionally, short interest accounts for a slim 0.7% of the security's float, and would take roughly two sessions to cover, at General Electric Company's average daily pace of trading.

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