Cabot Oil & Gas Options Price in Bigger-Than-Usual Post-Earnings Swing

A majority of analysts following the struggling stock carry "strong buy" recommendations

Managing Editor
Feb 22, 2018 at 3:12 PM
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Oil concern Cabot Oil & Gas Corporation (NYSE:COG) is set to report fourth-quarter earnings before the market opens tomorrow. The stock came into the year trading near its Nov. 30 two-year high of $29.57, but has since shed 15.9%, and dropped below the long-term support of its 200-day moving average. Today, COG is 3.5% higher at $24.04 -- amid a positive earnings reaction for Chesapeake Energy (CHK) -- but is running out of steam near $24.56, a 23.6% Fibonacci retracement of its 2018 high and low.

Looking at its earnings history, COG has shown limited success, ending higher the day after earnings in just three of the past eight quarters. Overall, the shares have averaged a post-earnings swing of 3.5% in either direction in the session after the company reports, looking back two years. This time around, the options market is pricing in a larger-than-usual 5.9% move for Friday's trading.

Another negative earnings reaction could spark a flood of bearish brokerage notes for the struggling oil stock. Of the 18 brokerages following COG, 14 carry "strong buy" recommendations. Plus, the average 12-month price target of $32.22 stands at a 34% premium to the equity's current perch.

Likewise, the shares could be pressure should short sellers start to increase their bearish exposure. While Cabot stock was struggling on the charts, short interest fell more than 21% over the past two reporting periods to 3.30 million shares -- a low 3% of the security's total available float.

 

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