Short-Term Calls Popular Ahead of Oil Giant's Earnings

Considering COG as a potential recovery play

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Cabot Oil & Gas Corporation (NYSE:COG) is an independent oil and gas company engaged in the exploration, development, and production of natural gas properties in the United States. Cabot Oil & Gas is engaged in hydrocarbon exploration and controls approximately 13.7 trillion cubic feet equivalent of proved reserves. This afternoon, COG was last seen trading up 1.6% at $16.65. 

Cabot Oil & Gas is slated to release earnings on Wednesday, July 28. COG has outperformed all earnings expectations on its last four earnings reports. Wall Street analysts expect that Cabot Oil & Gas stock will produce earnings of $0.31 per share, a slight drop quarter-over-quarter, in the upcoming earnings announcement.

For the second quarter of 2020, Cabot Oil & Gas beat analysts’ estimates by a margin of $0.03 and reported an earnings per share (EPS) of $0.05. For the third quarter of 2020, the company's EPS increased to $0.09, and COG beat expectations by a margin of $0.03. For the fourth quarter of 2020, Cabot Oil & Gas posted another increase in earnings, rising to $0.26 per share and also beating estimates by a margin of $0.05. For the first quarter of this year, Cabot Oil & Gas reported an EPS of $0.38 and beat expectations by a margin of $0.03 once again.

Cabot Oil & Gas stock has dropped 7% year-over-year, and is just days off its June 18 bottom of $15.28. For the short term, the equity remains just above its year-to-date breakeven mark. Cabot Oil & Gas stock also has a forward dividend of $0.44 and a dividend yield of 2.66%.

From a fundamental point of view, Cabot Oil & Gas has demonstrated extremely inconsistent growth. The company has experienced back-to-back years of revenue declines in both 2019 and 2020. In addition, COG's revenues are currently down by 19% since 2017. Overall, Cabot Oil & Gas stock may be due for some short-term gains after an extended bearish period. Although COG currently trades at a price-earning ratio of 23.60, its forward price-earning ratio is estimated to be 10.89.

An unwinding of optimism in the options pits could put pressure on the equity. Rite Aid stock's Schaeffer's put/call volume ratio (SOIR) of 0.23 stands in the lowest percentile of its 12-month range, meaning short-term options traders have rarely been more call-biased. 

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