Earnings Preview: American Express Company, The Coca-Cola Co, and ARM Holdings plc

American Express Company (NYSE:AXP), The Coca-Cola Co (NYSE:KO), and ARM Holdings plc (ADR) (NASDAQ:ARMH) will report first-quarter earnings tomorrow

by Karee Venema

Published on Apr 19, 2016 at 2:27 PM
Updated on Jun 24, 2020 at 10:16 AM

Blue-chip earnings are in focus this week, with Dow stocks Goldman Sachs Group Inc (NYSE:GS)Johnson & Johnson (NYSE:JNJ) and UnitedHealth Group Inc (NYSE:UNH) all higher in the wake of their firm's results. International Business Machines Corp. (NYSE:IBM), however, is not faring so well. Looking ahead, Dow components American Express Company (NYSE:AXP) and The Coca-Cola Co (NYSE:KO), as well as Apple Inc. (NASDAQ:AAPL) supplier ARM Holdings plc (ADR) (NASDAQ:ARMH) will report first-quarter earnings tomorrow. Here's a quick look at AXP, KO, and ARMH ahead of their respective reports.

Put buyers have been active on AXP in the lead up to tomorrow night's earnings report. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 1.24 ranks in the 78th annual percentile. Similar to other Dow stocks, though, AXP's near-term options are relatively inexpensive, even with the uncertainty surrounding the scheduled event. Specifically, AXP's Schaeffer's Volatility Index (SVI) of 23% sits below 70% of all comparable readings taken in the past year -- meaning the equity's short-term options are pricing in low volatility expectations at the moment.

On the charts, American Express Company has tacked on 26% since matching its four-year low of $50.27 in February -- including today's 1.1% pop to $63.28. However, the shares are running headlong into their overhead 120-day moving average, a trendline that's ushered AXP lower since January 2015.

KO, which will unveil its earnings report tomorrow morning, has seen an influx of call buying in recent weeks, per its 10-day ISE/CBOE/PHLX call/put volume ratio of 6.25 -- in the 98th percentile of its annual range. What's more, the stock's SVI of 15% ranks higher than just 28% of all similar readings taken in the past 12 months, meaning KO's short-term options are relatively affordable at current levels.

However, this optimism isn't shared among the brokerage bunch, with the majority of analysts maintaining a "hold" or worse suggestion toward the stock. This skepticism comes despite KO's spectacular 14.3% year-over-year advance to $46.46 -- fresh off an April 11 record high of $47.13. Should The Coca-Cola Co turn in a well-received earnings report, a round of upgrades could send the shares back into uncharted territory.

Option traders are more put-skewed than usual toward ARMH. Not only does the stock's 10-day ISE/CBOE/PHLX put/call volume ratio of 4.22 arrive in the 77th annual percentile, but its Schaeffer's put/call open interest ratio (SOIR) of 2.83 rests just 2 percentage points from a 52-week peak. In other words, short-term speculators have rarely been as put-heavy toward the equity as they are now. It's more of the same today, with puts crossing at eight times the average intraday pace, and buy-to-open activity detected at the front-month May 39 put.

Ahead of tomorrow morning's earnings report, the stock is up 3% at $42.07 -- paring a portion of Monday's AAPL-related losses. Longer term, ARM Holdings plc has spent 2016 wallowing under the weight of its 100-day moving average, down 7% on the year.

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