Schaeffer's Trading Floor Blog

Earnings on Deck: Wal-Mart Stores, Inc., J.C. Penney Company, Inc., and E-Commerce China Dangdang Inc (ADR)

Previewing WMT, JCP, and DANG ahead of their upcoming earnings reports

by 5/14/2014 2:21 PM
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While earnings season is winding down, a handful of notable reports are still trickling in. Among the companies scheduled to report tomorrow are blue-chip retailer Wal-Mart Stores, Inc. (NYSE:WMT), department store concern J.C. Penney Company, Inc. (NYSE:JCP), and Chinese Internet issue E-Commerce China Dangdang Inc (ADR) (NYSE:DANG). Here's a quick look at these names as earnings approach.

  • Wal-Mart Stores, Inc. (NYSE:WMT) will unveil its first-quarter figures bright and early tomorrow, unofficially marking the end to this earnings season. The company has exceeded analysts' per-share profit projections in six of the past eight quarters, yet the stock averages a single-session post-earnings decline of 0.9%. Despite some positive analyst attention this morning, most brokerage firms are wary of WMT. In fact, just eight out of 18 analysts consider the stock worthy of a "buy" or better endorsement. Elsewhere, options traders have grown increasingly skeptical, as the stock's 10-day put/call volume ratio on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits at 1.87 -- just 2 percentage points from a 12-month peak. In other words, options players have bought to open WMT puts over calls at a near-annual-high clip during the past two weeks. At last check, the shares were down 0.4% at $78.85, and were struggling to maintain a year-to-date gain.

  • J.C. Penney Company, Inc. (NYSE:JCP) will report first-quarter earnings after the close tomorrow. The firm has struggled in the earnings confessional, falling short of Wall Street's bottom-line estimates in seven of the past eight quarters. However, JCP surpassed expectations in its last turn in the earnings spotlight, translating into a one-week post-earnings gain of 39.3% for the shares. Nevertheless -- and despite outperforming the broader S&P 500 Index (SPX) by more than 44 percentage points during the past three months -- JCP boasts just three "strong buys," compared to 13 "holds" and three "strong sells." Likewise, short interest accounts for 31.3% of the stock's total available float, representing more than a week's worth of pent-up buying demand, at JCP's average pace of trading. Should the retailer stage a repeat earnings beat, a round of upgrades and/or a short-squeeze situation could help the shares extend their recent rebound. In afternoon action, JCP was last seen 2.9% lower at $8.83, but maintains a 3.8% gain month-to-date.

  • Finally, E-Commerce China Dangdang Inc (ADR) (NYSE:DANG) will release its first-quarter report before the open tomorrow. The company's earnings history is impressive, beating the consensus per-share estimate in seven of the past eight quarters. As such -- and primarily thanks to a one-week post-earnings surge of 79% after its last earnings release -- DANG averages a gain of 8.2% over the five sessions following earnings. In the options arena, traders are waxing optimistic on the shares, as the stock's 10-day ISE/CBOE/PHLX call/put volume ratio of 24.91 sits just 9 percentage points from an annual high. However, some of those calls may have been purchased by short sellers looking for a pre-earnings hedge. Short interest on DANG skyrocketed 55.7% during the past two reporting periods, and now accounts for a healthy 14.3% of the security's total float. At last check, DANG was bucking the broad-market trend lower, up 0.1% at $11.60, to bring its year-to-date gain to 21.5%.

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