Earnings Preview: AT&T Inc., Microsoft Corporation, and American Airlines Group Inc

AT&T Inc. (T), Microsoft Corporation (MSFT), and American Airlines Group Inc (AAL) are about to report earnings

by Andrea Kramer

Published on Oct 22, 2015 at 12:33 PM
Updated on Oct 22, 2015 at 12:33 PM

Quarterly reports continue to roll in this week, with McDonald's Corporation (NYSE:MCD) just hitting it out of the park. Among the firms slated to report soon are telecom titan AT&T Inc. (NYSE:T), blue-chip tech issue Microsoft Corporation (NASDAQ:MSFT), and travel stock American Airlines Group Inc (NASDAQ:AAL). Below, we'll take the pre-earnings temperature of T, MSFT, and AAL.

  • T is already making headlines ahead of tonight's earnings release. The company warned that third-quarter sales will likely fall short of the Street's "inflated" estimates, due to some M&A accounting discrepancies following its purchase of DIRECTV (NASDAQ:DTV). Nevertheless, the shares of T are up 1.1% at $33.98, sitting just north of their year-to-date breakeven level. In the options pits, traders are bracing for a post-earnings move of 2.2%, per the stock's near-term at-the-money (ATM) straddle. Over the past eight quarters, AT&T Inc. has averaged a single-day post-earnings move of 2%, and has ticked lower in six of the past eight quarters. Meanwhile, short-term option players are more put-biased than usual, as the equity's Schaeffer's put/call open interest ratio (SOIR) of 1.16 stands higher than 84% of all other readings from the past year. 
  • The options market is pricing in a 4.6% move for MSFT, which is also slated to report in just a few hours. In the session following its last eight earnings reports, Microsoft Corporation has averaged a 4.3% swing. At last check, MSFT is riding the blue-chip wave higher, up 4.3% at $48.72. Option players are rolling the dice on even more upside, it seems. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day call/put volume ratio rests at an annual high of 7.07. In other words, MSFT speculators have bought to open calls over puts at a much faster-than-usual clip during the past two weeks.
  • Lastly, option bears have been swarming AAL ahead of earnings tomorrow morning, based on its 10-day ISE/CBOE/PHLX put/call volume ratio of 0.61 -- outranking 81% of comparable readings from the past year. The stock has averaged a one-day post-earnings swing of 4.3% over the past seven quarters, but its near-term ATM straddle is pricing in a 3.5% move. On the charts, American Airlines Group Inc is rallying along with sector peers United Continental Holdings Inc (NYSE:UAL) and Southwest Airlines Co (NYSE:LUV), both enjoying post-earnings upside. AAL was last seen 3.1% higher at $45.68, and on pace to end the month atop its 10-month moving average a for the first time since April.

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