Earnings Preview: Staples, Inc., Lowe's Companies, Inc., and Target Corporation

Staples, Inc. (NASDAQ:SPLS), Lowe's Companies, Inc. (NYSE:LOW), and Target Corporation (NYSE:TGT) are set to report earnings on Wednesday

Nov 17, 2015 at 3:14 PM
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With Wall Street applauding quarterly results from a pair of blue-chip retailers, three sector peers are gearing up for their earnings reveals tomorrow. Next to step into the earnings spotlight is Staples, Inc. (NASDAQ:SPLS)Lowe's Companies, Inc. (NYSE:LOW), and Target Corporation (NYSE:TGT). Below, we'll take the pre-earnings temperature of SPLS, LOW, and TGT.

  • Going back eight quarters, SPLS has averaged a post-earnings move of 5.7%. Heading into the company's earnings event tomorrow morning, speculators are pricing in a bigger move of 7.7%, based on the equity's near-term at-the-money (ATM) straddle. According to data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), option traders are betting on this move to resolve to the upside. Staples, Inc.'s 10-day call/put volume ratio across these exchanges stands at a top-heavy 22.89, which is higher than two-thirds of readings from the past year. Today, however, the shares have dropped 2% to $12.45, following Friday's news that the company (along with Office Depot Inc (NASDAQ:ODP), with which it has agreed to merge) is in talks with Essendant Inc (NASDAQ:ESND) to sell roughly $600 million of corporate contracts, in an attempt to appease antitrust regulators. 

  • As Home Depot Inc (NYSE:HD) enjoys yet another positive post-earnings reactionLOW will look to deliver an earnings win of its own tomorrow morning. The stock's near-term ATM straddle data suggests an expected swing of 4.6% following the report -- versus a typical post-event move of 3.6%, looking back eight quarters -- and option traders have taken a call-skewed approach. Lowe's Companies, Inc.'s Schaeffer's put/call open interest ratio (SOIR) sits at 0.86, landing in the 38th annual percentile. Said differently, call open interest among options expiring in the next three months outweighs put open interest by a wider-than-usual amount. The stock was last seen 2.3% higher at $73.31 on a halo lift from rival HD, bringing the former's 2015 lead to 6.5%. 

  • TGT has underperformed the broader S&P 500 Index (SPX) by nearly 11.5 percentage points during the past three months, but has managed to pick up 0.9% at $72.97 ahead of the retailer's earnings release tomorrow morning. The shares have enjoyed gains in the session following the company's last six quarterly reports, and this time around, the stock's near-term ATM straddle is pricing in a 5.8% swing -- roughly doubling the typical single-session post-event move of 3%, based on the past eight quarters. Elsewhere, short interest has been surging on Target Corporation. Specifically, over the two most recent reporting periods, short interest has jumped 20.2%, and now accounts for over a week's worth of buying power, going by normal daily volumes. 

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