Earnings Preview: Oracle, Kroger, and Rite Aid

Analyzing pre-earnings option trends on Oracle Corporation (ORCL), Kroger Co (KR), and Rite Aid Corporation (RAD)

Jun 17, 2015 at 11:22 AM
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Among the companies about to step up to the earnings plate are software issue Oracle Corporation (NYSE:ORCL), grocery chain Kroger Co (NYSE:KR), and pharmacy concern Rite Aid Corporation (NYSE:RAD). Below, we'll take the pre-earnings temperature of ORCL, KR, and RAD. 

  • ORCL will unveil its fiscal fourth-quarter figures after the close today. The stock has averaged a single-session post-earnings move of 4.6% over the last eight quarters, and reacted positively after its last two reports. This time, the options market is pricing in a 3.9% swing in either direction, judging by the security's short-term at-the-money (ATM) straddle. On the charts, Oracle Corporation has sashayed steadily higher over the past two years, but has spent most of 2015 bumping up against resistance in the $45 neighborhood. The shares were last seen near breakeven at $44.64, but option buyers might be banking on a breakout. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 50-day call/put volume ratio of 2.38 stands higher than 79% of all other readings from the past year, reflecting a healthier-than-usual appetite for long calls over puts during the past 10 weeks.
  • KR is scheduled to report first-quarter earnings bright and early tomorrow. The stock has enjoyed four straight positive earnings reactions, advancing 6.7% in the session after its last earnings report. Over the past eight quarters, Kroger Co has averaged a one-day move of 3.6%, and option traders this go-round are pricing in a 3.9% move, according to the equity's short-term ATM straddle. The shares have taken a breather since touching an all-time high of $77.74 in mid-March, and were last seen in the $72.91 vicinity. Another strong earnings showing could shake loose some of the recent option bears, as the stock's 10-day ISE/CBOE/PHLX put/call volume ratio of 0.52 registers in the 82nd percentile of its annual range. A mass exodus of skeptics could send KR to its next high.
  • Finally, RAD will also report first-quarter earnings ahead of the bell tomorrow. The stock has made some dramatic post-earnings moves in both directions during the past eight quarters, averaging a one-day reaction of 10.7%. Option players are pricing in a much milder swing of 5.9% this time, judging by Rite Aid Corporation's short-term ATM straddle. On the charts, RAD has advanced 18.4% in 2015, and was last seen at $8.90 -- just a stone's throw from its 14-year peak of $9.07, tagged in early April. In fact, the shares hit an intraday high of $9.06 today. While option buyers have been picking up bullish bets at a quicker-than-usual step -- the equity's 10-day ISE/CBOE/PHLX call/put volume ratio of 5.4 is higher than 68% of all other readings from the past year -- an unwinding of short interest in the wake of an earnings win could propel RAD even higher.

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