Schaeffer's Trading Floor Blog

Analyst Downgrades: McDonald's, Caterpillar, and Axis Capital Holdings

Analysts downwardly revised their ratings on MCD, CAT, and AXS

by 9/28/2012 9:20 AM
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Analysts are weighing in today on fast food chain McDonald's Corporation (NYSE:MCD - 93.27), construction equipment manufacturer Caterpillar Inc. (NYSE:CAT - 86.92), and insurance firm Axis Capital Holdings Limited (NYSE:AXS - 34.92). Here's a quick roundup of today's bearish brokerage notes.

  • MCD was downgraded to "neutral" from "buy" at Janney in pre-market activity, who cited weak same-store sales as a catalyst for the move. The stock has shed about 7% so far this year, but that hasn't stopped call players from converging on the equity. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows a 20-day call/put volume ratio of 1.78 for MCD, conveying that calls bought to open have nearly doubled puts during the past month. Also, the security's Schaeffer's Volatility Index (SVI) of 13% ranks higher than just 10% of comparable reading taken during the last 12 months -- suggesting that near-term options are relatively cheap right now.

  • Despite a year-over-year climb of around 15%, Bank of America-Merrill Lynch resumed coverage of CAT with a "neutral" recommendation today, reducing its previous "buy" endorsement after the company slashed its 2015 earnings forecast. In the options pits, puts have the upper hands over calls, as evidenced by the stock's 10-day ISE/CBOE/PHLX put/call volume ratio of 1.15. In other words, traders have bought to open 115 puts for every 100 calls over the last two weeks. This ratio is docked in the 83rd percentile of its annual range, meaning speculators have picked up puts over calls at a faster clip just 17% of the time over the past 52 weeks.

  • Last but not least, AXS was cut to "equal weight" from "overweight" at Evercore Partners this morning, which could chip away at the security's 52-week gain of about 36%. Nevertheless, puts are the options of choice among short-term traders, as the stock's Schaeffer's put/call open interest ratio (SOIR) checks in at 0.26 -- indicating that calls nearly quadruple puts among options that are scheduled to expire within the next three months. This ratio registers ranks lower than 70% of other such readings taken over the past year, reflecting a stronger-than-usual preference for bullish options over bearish.

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