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Earnings Preview: Boeing Co and The Coca-Cola Co

The stock market could move tomorrow on earnings results from Dow components Boeing Co (BA) and The Coca-Cola Co (KO)

Jul 26, 2016 at 11:09 AM
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Stocks are reacting this morning to another round of earnings from Dow components, and it doesn't seem like that will end any time soon. Specifically, blue-chip stocks Boeing Co (NYSE:BA) and The Coca-Cola Co (NYSE:KO) will both report earnings tomorrow morning. Let's take a closer look at expectations in the options pits leading up to the events.

On the charts, BA has largely been chopping between $125 and $135 since late March. Speaking more broadly, since the start of the year, the stock has surrendered roughly 8% to trade at $133.22, with its upside moves capped by its descending 200- and 320-day moving averages.

Still, options players have been pretty bullish of late. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open 1.15 BA calls for each put over the past two weeks -- a ratio that ranks just 10 percentage points from an annual high. Likewise, BA's Schaeffer's put/call open interest ratio (SOIR) of 1.32 rests in the low 6th percentile of its 12-month range, hinting at a relatively unusual interest in calls among options expiring in the next three months.

In terms of tomorrow's earnings report, the options market is currently pricing in a 4.6% single-day swing for Boeing Co. This is slightly wider than its average move of 3.5% over the past eight quarters.

Shifting our focus to KO, the stock has historically struggled in the aftermath of earnings. Looking back eight quarters, the shares have been lower in the ensuing session five times, with an average loss of 2.9%. Options traders are again counting on post-earnings losses, based on KO's 10-day ISE/CBOE/PHLX put/call volume ratio of 2.73 -- which outstrips 96% of all other readings recorded in the last 12 months.

Then again, these put buyers could also be shareholders hedging, considering how well The Coca-Cola Co has performed in 2016 amid persistent M&A rumblings. Year-to-date, the beverage stock is up a solid 5.5% at $45.30, and has been tracing a series of higher lows since its August bottom.

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