Schaeffer's Trading Floor Blog

Earnings on Deck: Google Inc, International Business Machines Corp., and Bank of America Corp

Previewing GOOGL, IBM, and BAC ahead of their upcoming earnings reports

by 4/15/2014 2:29 PM
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It's already been a big week in the earnings confessional, but the fun's not over yet. Still slated to report are search titan Google Inc (NASDAQ:GOOGL), blue-chip tech concern International Business Machines Corp. (NYSE:IBM), and financial firm Bank of America Corp (NYSE:BAC). Here's a quick look at these names as earnings approach.

  • Google Inc (NASDAQ:GOOGL) will unveil its first-quarter earnings after the close tomorrow, and has exceeded analysts' bottom-line estimates in four of the past seven quarters. Wall Street is optimistic when it comes to the stock, as 25 out of 29 analysts offer up "buy" or better ratings, with nary a "sell" in sight. Meanwhile, options traders prefer calls over puts. The stock's Schaeffer's put/call open interest ratio (SOIR) of 0.83 indicates that calls outnumber their put rivals among options expiring within three months. Likewise, the security's 10-day call/put volume ratio on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) rests at 1.45, indicating that traders have bought to open more GOOGL calls than puts during the past two weeks. At last check, the stock has shed 0.9% to flirt with $540.60, as investors digest the company's purchase of Titan Aerospace.

  • International Business Machines Corp. (NYSE:IBM) will also report first-quarter earnings after the close tomorrow. The firm has bested the Street's per-share profit projections in six of the past eight quarters, yet averages a one-week post-earnings deficit of 3.1%. As such, options traders are exercising caution ahead of IBM's next earnings release. The stock's 10-day ISE/CBOE/PHLX put/call volume ratio of 1.66 sits just 6 percentage points from a 52-week peak, suggesting speculators have bought to open puts over calls at a near-annual-high clip during the past two weeks. In the same vein, the security's SOIR of 1.11 stands just 5 percentage points from its own annual acme. Elsewhere, analysts are also wary of IBM, with just four out of 15 doling out "strong buy" endorsements. While IBM has outperformed the broader S&P 500 Index (SPX) by nearly 9 percentage points during the past two months, it's 0.7% lower at $196.34 today, after Citigroup downgraded the shares to "neutral" from "buy" and cut its price target to $200 from $235.

  • Finally, Bank of America Corp (NYSE:BAC) is scheduled to report first-quarter earnings ahead of the bell tomorrow. The company has topped analysts' bottom-line estimates in each of the past three quarters, and advanced 2.3% in the week after its last earnings report. While options buyers have picked up BAC calls over puts at an annual-high clip during the past two weeks on the ISE, CBOE, and PHLX, there's still plenty of room on the bullish bandwagon. Just seven analysts deem BAC worthy of a "buy" or better rating, compared to 12 tepid "holds" and two "strong sells." Plus, the consensus 12-month price target of $17.56 represents expected upside of just 9.1% from the stock's current perch at $16.09. Should Bank of America continue its winning streak in the earnings spotlight, a flood of upgrades and/or price-target boosts could add contrarian fuel to the equity's fire.

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