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Earnings Preview: Tiffany & Co. (TIF)

Opinions across Wall Street are mixed ahead of Tiffany & Co.'s (TIF) earnings report

Mar 17, 2016 at 3:05 PM
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Tiffany & Co. (NYSE:TIF) is scheduled to report fourth-quarter earnings ahead of the open tomorrow, and the stock has generally fared well following earnings releases in the past. Going back eight quarters, TIF has moved higher in the session immediately following the company's earnings release five times, including a 3.6% advance last November. On average, the stock has swung 4.2% in either direction, yet the options market is pricing in a much steeper 8.1% post-earnings move ahead of Friday's event. 

On a closer look, the options activity on TIF is somewhat peculiar. The stock's Schaeffer's put/call open interest ratio (SOIR) comes in at 2.79 -- an annual high. So not only does put open interest among options set to expire within the next three months nearly triple call open interest, but short-term traders are also more put-skewed now than at any point in the past year. 

However, during the past two weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call buying has more than doubled put buying. This is according to TIF's 10-day call/put volume ratio of 2.18, which lands in the 80th percentile of its annual range. 

And calls are hot again today, with volume already hitting an annual high. In fact, 13 times as many calls have crossed as what's usually seen at this point in the day, mostly due to bullish spread activity at the March 72 and 75 calls. Based on ISE data, one trader bought to open a 2,741-contract block at the lower strike, and sold to open a matching block at the higher, hoping for a post-earnings push past the $75 level by tomorrow's close. 

Elsewhere on Wall Street, many are skeptical of TIF. For one, the stock's short-interest ratio stands at an elevated 6.50. Moreover, while nine brokerage firms call the stock a "strong buy," the other eight that track the shares say they're a "hold" or worse.

On the charts, Tiffany & Co. (NYSE:TIF) doesn't have much to brag about, dropping almost 17% in the past 12 months. However, the shares are up 1.6% today at $71, and seem to have finally conquered their 80-day moving average, which blocked previous breakout attempts in November and December. 
 

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