Earnings Preview: McDonald's Corporation, Halliburton Company, and D.R. Horton, Inc.

McDonald's Corporation (NYSE:MCD), Halliburton Company (NYSE:HAL), and D.R. Horton, Inc. (NYSE:DHI) will unveil earnings Monday morning

Jan 22, 2016 at 9:52 AM
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Earnings season is picking up steam, with a number of notable names set to take their turn in the confessional next week. Kicking things off bright and early Monday morning will be blue chip McDonald's Corporation (NSYE:MCD), oil-and-gas issue Halliburton Company (NYSE:HAL), and homebuilder D.R. Horton, Inc. (NYSE:DHI). Below, we'll take the pre-earnings temperature of MCD, HAL, and DHI.

  • Put buyers have been active in MCD's options pits of late, per the stock's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 1.05 -- in the 94th percentile of its annual range. With earnings on the horizon, those purchasing MCD's near-term options have been willing to pay a pretty penny, too. Specifically, the security's Schaeffer's Volatility Index (SVI) of 28% sits above 78% of all comparable readings taken in the past year.

    Historically speaking, the security has averaged a single-session post-earnings swing of 2% over the past eight quarters, but based on MCD's weekly 1/29 at-the-money (ATM) straddle, the options market is expecting a bigger move of 5% next week. On the charts, McDonald's Corporation has rallied 35% since hitting a two-year low of $87.50 in late August, with the stock's recent pullback contained by its 50-day moving average. At last check, shares of MCD were trading at $118.26.

  • Energy stocks have had it rough amid oil's steep decline, and HAL is no exception. Since hitting an annual high of $50.20 last May, the shares have surrendered 39% to trade at $30.44 -- and are fresh off Wednesday's three-year low of $27.64. Against this backdrop, option traders have been quickly moving to the bearish side of the fence, as evidenced by HAL's 10-day ISE/CBOE/PHLX put/call volume ratio of 2.46, which sits just 6 percentage points from a 52-week peak.

    Meanwhile, the options market has been pricing in big volatility expectations, per HAL's 30-day ATM implied volatility of 50% -- in the 97th percentile of its annual range. Looking back over the past eight quarters, the stock has averaged a single-session post-earnings move of 1.6%. This time around, though, Halliburton Company's near-term ATM straddle is projecting a loftier 6.5% swing.

  • DHI has made some volatile post-earnings moves in the session subsequent to reporting, averaging a 6.8% swing over the last eight quarters. Next week -- based on the equity's weekly 1/29 ATM straddle -- the options market is expecting the stock to move 7.4%. It appears speculative players are bracing for this action to occur to the downside, as DHI's 50-day ISE/CBOE/PHLX put/call volume ratio of 1.48 rests higher than 92% of all similar readings taken in the past year. Volatility expectations are high, too, considering the stock's SVI of 47% ranks just 13 percentage points from a 12-month high.

    Technically, shares of D.R. Horton, Inc. have been in freefall since topping out at a nine-year high of $33.10 in early December, down 18%. DHI is getting a boost from broad-market tailwinds today, though, up 2.2% at $27.23, despite a price-target cut to $34 from $37 at Susquehanna.
 

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