Schaeffer's Trading Floor Blog

Earnings on Deck: JPMorgan Chase & Co., Wells Fargo & Co, and Family Dollar Stores, Inc.

Previewing JPM, WFC, and FDO ahead of their upcoming earnings reports

by 4/9/2014 2:50 PM
Stocks quoted in this article:

Headed to the earnings confessional this week are financial concerns JPMorgan Chase & Co. (NYSE:JPM) and Wells Fargo & Co (NYSE:WFC), as well as discount retailer Family Dollar Stores, Inc. (NYSE:FDO). Here's a quick look at these names as earnings approach.

  • JPMorgan Chase & Co. (NYSE:JPM) will report first-quarter earnings ahead of the bell on Friday. The company has topped the Street's per-share profit projections in six of the past eight quarters, but averages a one-week post-earnings gain of less than 0.1%. Ahead of the report, Wall Street is optimistic when it comes to JPM, with analysts doling out 17 "buy" or better endorsements, compared to four "holds" and just one "sell" rating. Likewise, the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.70 stands higher than just 24% of all comparable readings from the past year, suggesting short-term options players are more call-heavy than usual right now. On the charts, the shares of JPM touched a 13-year peak of $61.48 in late March, but have since pulled back to trade just shy of $59. Off the charts, JPMorgan Chase CEO Jamie Dimon is also optimistic, calling the U.S. banking system "sound" -- not to mention in better shape than its European counterpart.

  • Wells Fargo & Co (NYSE:WFC) will also report first-quarter figures before the open on Friday. The firm has exceeded analysts' bottom-line estimates in each of the past eight quarters, averaging a gain of 0.8% in the week after reporting. However, option buyers are exercising caution ahead of the report, with put buying picking up steam. 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 0.99 sits 13 percentage points from an annual high, reflecting a healthier-than-usual appetite for long puts over calls. It's worth noting, though, that WFC -- last seen at $48.92 -- has tacked on 7.7% in 2014, and touched a record high of $50.49 on Friday. Against this backdrop, it's possible that WFC shareholders are buying puts to lock in gains in the event of a post-earnings dip.

  • Finally, Family Dollar Stores, Inc. (NYSE:FDO) is slated to release its fiscal second-quarter earnings before the opening bell tomorrow. The company has been spotty in the earnings confessional, falling short of the consensus per-share estimate in four of the past seven quarters. Furthermore, the security averages a one-week post-earnings deficit of 0.4%. From a sentiment standpoint, the scales are tipped to the bears' side, with not one of the 19 covering analysts offering up a "buy" or better endorsement. Meanwhile, the equity sports a 10-day ISE/CBOE/PHLX put/call volume ratio of 2.03 -- just 10 percentage points from a 52-week peak. Short-term option bears are paying up for their contracts, too, as FDO's Schaeffer's Volatility Index (SVI) of 44% stands higher than 76% of all other readings from the past year. In simpler terms, FDO's short-term options are relatively expensive ahead of earnings, from a historical standpoint. At last check, FDO has added 0.3% to trade at $58.89, but remains 9.4% lower year-to-date.

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