Earnings Preview: Urban Outfitters, Inc. (URBN)

Traders are expecting a bigger-than-usual post-earnings move from Urban Outfitters, Inc. (NASDAQ:URBN)

by Josh Selway

Published on Nov 13, 2015 at 3:09 PM
Updated on Jun 24, 2020 at 10:16 AM

As a brutal week on Wall Street comes to a merciful close, many are already looking ahead to next week. Much of the earnings attention will focus on Tuesday, when blue chips Home Depot Inc (NYSE:HD) and Wal-Mart Stores, Inc. (NYSE:WMT) report. However, another notable name, retailer Urban Outfitters, Inc. (NASDAQ:URBN), will report a day earlier. Below, we'll take a pre-earnings look at URBN. 

URBN is sliding alongside its retail peers today, giving up 6.3% to trade at $24.49, and earlier touching a three-year low of $24.43. Option traders are betting on extended losses, too, ahead of Monday's event. Puts are crossing at five times the average late-day pace, with apparent buy-to-open activity detected at the equity's November 23 put. In other words, traders are expecting another multi-year low from Urban Outfitters, Inc. by front-month expiration, at next Friday's close. 

Put buying is nothing new for the equity's option traders. Looking at data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), URBN's 10-day put/call volume ratio stands at 3.17. Not only have more than three puts been bought to open for every call in recent weeks, but this ratio stands higher than 94% of all other readings from the past year. In short, put buying has been unusually popular leading up to earnings. 

With Urban Outfitters, Inc. (NASDAQ:URBN) having now given back 30% of its value in 2015, shareholders have to be hoping the company can perform better post-earnings than it generally has in the past. Specifically, URBN has only finished a post-earning session in the black twice, going back eight quarters -- with an average swing of 6.7%. This time around, the options market is pricing in a loftier move of 10.8%, going by the security's near-term at-the-money straddle

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