Schaeffer's Trading Floor Blog

Earnings on Deck: Walgreen Company, Carnival Corporation, and Paychex, Inc.

Previewing WAG, CCL, and PAYX ahead of their upcoming earnings reports

by 3/24/2014 10:34 AM
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Headed to the earnings confessional this week are pharmacy bigwig Walgreen Company (NYSE:WAG), cruise concern Carnival Corporation (NYSE:CCL), and payroll provider Paychex, Inc. (NASDAQ:PAYX). Here's a quick look at these names as earnings approach.

  • Walgreen Company (NYSE:WAG) will report fiscal second-quarter earnings before the open tomorrow. The firm has matched or exceeded the Street's per-share profit projections in five of the past eight quarters, yet averaged a loss of 1.1% in the week after reporting. Ahead of the event, long puts are picking up steam, relative to their call counterparts. 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) rests at 1.07, in the 78th percentile of its annual range. Analysts, on the other hand, are optimistically aligned, with 13 out of 22 brokerage firms offering up "buy" or better ratings. In fact, SunTrust Robinson this morning lifted its price target to $77 from $70 (though Cantor Fitzgerald downgraded WAG to "sell" from "hold"). At last check, WAG is down 0.3% at $64.57, trimming its year-to-date gain to roughly 12.4%.

  • Carnival Corporation (NYSE:CCL) will unveil its fiscal first-quarter earnings bright and early tomorrow. Historically, the company has topped analysts' bottom-line estimates in each of the past seven quarters, but dropped 2.7%, on average, in the week after reporting. Nevertheless, the security sports a 50-day ISE/CBOE/PHLX call/put volume ratio of 4.23 -- just 9 percentage points shy of an annual peak. In other words, option buyers have picked up CCL calls over puts at a near-annual-high clip during the past 10 weeks. However, short interest represents more than a week's worth of pent-up buying demand, at the equity's average pace of trading, suggesting some of the recent call buying could be attributable to pre-earnings hedging activity among the shorts. In early trading, CCL has shed 0.1% to flirt with $39.93, and remains just south of breakeven for 2014.

  • Finally, Paychex, Inc. (NASDAQ:PAYX) will release its fiscal third-quarter figures after the close on Wednesday. The company has matched or topped analysts' per-share earnings predictions in each of the past eight quarters, but averaged a one-week post-earnings deficit of 1.2%. The security's 10-day ISE/CBOE/PHLX call/put volume ratio of 6.26 stands higher than 82% of all other readings of the past year, pointing to a healthier-than-usual appetite for bullish bets over bearish of late. Again, though, it would take more than a week to repurchase all of PAYX's shorted shares, hinting at possible hedging activity. Analysts, meanwhile, are decidedly skeptical of PAYX, which boasts just one "strong buy," compared to 13 "holds" and four "sell" or worse ratings. At last look, the shares are 0.7% lower at $42.54, bringing their year-to-date loss to roughly 6.6%.

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