LOW puts are running at 2.5 times the clip of calls in the last 10 days
When we checked in with Lowe's Companies Inc (NYSE:LOW) earlier this month, the home improvement retailer was in the midst of selling the Canadian arm of its business. Today, we're going to talk about Lowe's earnings report, set for next Wednesday, Nov. 16 before the market opens. Ahead of the event, options traders are positioning themselves for downside.
Lowe's has a rather muted history of post-earnings reactions. The stock added only 0.6% after its August report, and has overall averaged a post-earnings move of 3.6% in the last two years. This time around though, the options market is pricing in a larger-than-usual 7.9% move for next Wednesday's trading.
At last check, Lowe's stock is up 9.3% to trade at $203.92, taking cues from the seismic U.S. equity rally today. LOW is heading for its highest close since Sept. 12, and is poised to clear its 200-day moving average on a closing basis for the first time since Aug. 18. Year-to-date, the equity is down 21%, but does offer a dividend yield of 0.6% at a forward dividend of $1.96.
Moreover, the business is estimated to report 0.7% revenue growth and 12.4% earnings growth for fiscal 2023. Lowe’s is also expected to see a 0.4% increase in revenue and a 6.4% increase in earnings for fiscal 2024, signaling a slowdown in the company’s top and bottom line growth. Previously, the business reported a 7.4% increase in revenue and a 44.7% increase in net income for fiscal 2022. In addition, the business has grown its revenues and net income by 35% and 264.5% respectively between fiscal 2019 and fiscal 2022, making LOW’s valuation very intriguing from a long-term perspective.
Puts have been much more popular than usual in the options pits, per LOW's 10-day put/call volume ratio of 2.52 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which ranks higher than 96% of readings from the past year.